The king of all cryptocurrencies has lost almost half of its market value after reaching an all-time high in April. Other cryptocurrencies have followed suit, dipping due to several factors, including China’s decision to restrict cryptocurrency transactions. The Securities and Exchange Commission has also called for tougher measures to control digital currencies and regulations.

Despite these challenges, many crypto lovers still see crypto as the solution to many problems surrounding the future of fiat currencies. The financial world has faced skyrocketing indebtedness and increased government balance sheets due to conventional currencies.

Crypto enthusiasts remain optimistic. They believe that, despite current challenges, ongoing advancements in financial technology will support the growth of digital currencies. They also think cryptocurrency will become an alternative store of value, independent of central banks.

Despite this belief, cryptocurrencies still possess some of the characteristics of fiat currencies controlled by the government. Just like traditional currencies crypto has no actual value. Users simply make transactions with the aid of a legal tender or another real asset for a digital currency possessing no intrinsic value. The supply of these digital currencies is controlled artificially by a complicated computer algorithm and they are sold on digital platforms such as british bitcoin profit.

Problems associated with the creation of digital currencies

The creation of these digital currencies has created several problems. Crypto transactions are outside the regulated financial system. This makes them perfect for fraud like hacking, and stealing, tax evasion and money laundering.

Cryptocurrencies are too unstable as a medium of exchange. Early in 2020 you could use bitcoin to purchase a tesla. However, this is no longer the case after Elon Musk assisted the massive rise in the market value of bitcoin due to his announcement that people can buy tesla with bitcoin. The recent dip in bitcoin highlights the issue of using cryptocurrencies as a means of exchange.

Musku U-turn on bitcoin comes as a result of more awareness about the environmental effect of mining cryptocurrencies.

Cryto mining is even worse for the environment compared to conventional mining. Bitcoin mining alone generates a lot of CO2, one of the gas responsible for global warming.

If crypto mining is left unchecked it will continue to lead to even more environmental harm.

Countries banning the use of cryptocurrencies

When it comes to the tech supporting crypto, central banks are continuously trying to include digital technology to support their fiat currencies as they try to deal with crypto transactions. One instance of this is the announcement made by the People’s Bank of China, to introduce more restrictions on crypto transactions. This marks a new wave of crackdown on cryptocurrencies by the Chinese government.

Other countries, including Nepal, Morocco, Algeria, Vietnam, Bolivia, and Pakistan, have joined China in restricting crypto transactions. They argue that cryptocurrencies help criminals move money easily and evade law enforcement agencies.

Jerome Powell, the Federal Reserve Chairman of the United States, also announced plans to introduce a digital dollar. This would be under the control of the country’s central bank and reflects growing interest in digital currencies and regulations.

Conclusion

According to non-fintech experts, a vital important difference between the current digital currencies and those issued by a central bank is that the issued currencies come with the added benefit of being properly regulated. Not only that it is being issued and monitored by a trustworthy authority. This might just be the change that the financial world needs to answer many questions facing its banking system. However, many crypto enthusiasts disagree. Still the fact remain that cryptocurrencies faces an uphill battle it they are to change the minds of the governments of the world that they can truly answer its financial problems.