Since its inception and during its turbulent journey to mainstream adoption, crypto has sparked both enthusiasm and trepidation in equal measure. After the unfair mistreatment it has received over the years, it is time to defend digital currencies.
Unfortunately for crypto, first impressions count. Bitcoin (BTC) initially acquired a tawdry reputation in its early years as the currency of choice for illegal activity – favored by dark web users, ransomware hackers, drug traffickers and money launderers around the world.
But the world has changed since the first Bitcoin was mined in January 2009. There are now more than 18 million of them in circulation and more than 90,000 people have stashed $1 million or more in Bitcoin, according to cryptocurrency data tracking company Bitinfo Cards.
Indeed, there are signs that crypto is finally becoming mainstream. Just last year, El Salvador declared Bitcoin legal tender in September, and in October the first Bitcoin futures-linked exchange-traded fund (ETF) in the United States began trading on the New York Stock Exchange. Payments giant Visa also launched a Global Crypto Advisory Practice in December, helping financial institutions advance their own crypto journey.
There are even rumors of crypto becoming a medium of exchange in Afghanistan, providing a very real example of crypto enabling financial transactions in a situation where the monetary system itself collapses.
Related: How do Afghans use crypto under the Taliban government?
The obstacles and barriers
Despite these success stories, nagging doubts remain among the public and objections have been raised by politicians fearing a decentralized currency that puts the general public in charge of their own money. China declared crypto transactions illegal in September, citing concerns about gambling and money laundering. Politicians around the world have expressed concern about the potential to transform the established dynamics of the existing financial ecosystem.
The underlying factor behind all of this is fear, and recent research suggests it could be a fear of the unknown. According to a national survey commissioned by money app Ziglu, nearly a third (31%) of Britons surveyed are curious about investing in crypto, but 62% of those surveyed have held back from buying because they don’t understand the market. However, as a sign that cryptocurrency is gaining legitimacy in the eyes of the public, the survey also found that b
Bitcoin is now considered a smarter investment than real estate.
Now is the time to recognize that while there are inherent risks, cryptocurrency is also a positive factor in the world. In an era of sharply declining savings rates, this relatively new asset class offers all of us the opportunity to invest in crypto without the traditional barriers that exist in traditional finance, no matter how much or how little money we have available.
Related: Stablecoin Adoption and the Future of Financial Inclusion
Some people don’t even have a safe place to store their hard-earned money. According to data from the World Bank, 1.7 billion people worldwide do not have a bank account. Many of us take the ability to move money via credit cards and bank transfers — sending large amounts of money to our friends and family with the tap of our smartphones — for granted, but for those without a bank account, this isn’t possible.
However, more than 80% of the world’s population owns a smartphone, which is all they need to send cryptocurrency across international borders. Crypto drives financial inclusion by giving millions of people without access to platforms like PayPal or Venmo the ability to transfer money for just pennies. It is also a good alternative for those who dislike high bank charges, as this new infrastructure, unlike traditional payment rails, is not limited by profit motivation.
The Benefits of Crypto
Smart contracts can replace services from banks, money transfer companies or legal services, while cryptocurrencies and digital wallets can provide flexibility such as credit to customers and financial sovereignty without the need for a centralized entity.
Crypto can also protect citizens from economic turmoil. Venezuela is a prime example where many citizens are already dealing with high inflation and the impact of United States sanctions hitting their banks as well. They increasingly convert their wages into crypto and use the blockchain to transfer and pay money.
For developing countries, Bitcoin is an excellent way for society to eliminate corruption because the community can track every Bitcoin transaction in the ledger when people use the cryptocurrency to transfer money.
Closer to home, crypto is also democratizing finance. There are low barriers to entry without the need for a broker or high equity. Anyone can invest for themselves and create wealth. As a result, people learn about concepts such as annual percentage rates, borrowing and lending, and the history and purpose of money.
Disadvantages of Crypto
But any crypto defense cannot avoid the elephant in the room: crime. It has long been associated with fraud and ransomware, but the truth is that blockchain is the perfect system to thwart such criminal activity.
Related: Bitcoin can no longer be seen as an untraceable ‘crime currency’
Cryptocurrencies are not anonymous, they are pseudonymous. The open ledger on which crypto lives and moves allows law enforcement to track and trace the flow of money in real time, providing unprecedented insight into financial flows. Criminals must also convert crypto into fiat currency, opening up opportunities to not only blacklist the wallet addresses but also proactively catch the criminals.
Therefore, as with the ransomware attack on the Colonial Pipeline in the US in June 2021, the police were able to track down and eventually confiscate the ransom. That recovery was only possible because cryptocurrency was the means of payment.
Related: Don’t blame crypto for ransomware
The advantage of blockchain is that it is fraud-resistant. Through a process called consensus, each transaction is independently verified by multiple parties. Submissions are immutable, meaning they cannot be changed and can only be updated by adding an addendum.
We advocate for a specialized unit within law enforcement in the field of cybercrime. Why is it necessary? Have dedicated technical and human resources that can proactively work with companies that have been breached with a ransom demanded in crypto. It would be able to communicate and notify all crypto exchanges so that they can identify when and if the criminal wants to cash out money on the exchange.
Another point that is rightly raised about crypto is its environmental impact: the sheer amount of electricity required to mine proof-of-work currencies like Bitcoin requires warehouses full of powerful computer rigs running constantly.
However, this is already changing. Currently, more than half of Bitcoin miners use renewable energy. A Bitcoin mining operation opened northeast of Niagara Falls on the site of the last working coal-fired power plant in New York State, using cheap hydroelectric power to run its facilities. Meanwhile, El Salvador’s president Nayib Bukele has announced an even more creative plan to use geothermal energy from the Conchagua volcano to power his Bitcoin City project.
Cryptocurrency’s journey to mainstream adoption is almost complete. Therefore, now is the time to overcome our often unfounded fears and embrace the financial freedom, security and convenience it offers.
This article does not contain investment advice or recommendations. Every investment and trading move carries risks, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Ian Taylor is the Executive Director of CryptoUK, an independent industry association that exists as a cohesive, credible voice for the evolving crypto industry in the UK. After 20 years in investment banking, he has held many senior positions in trade, treasury and risk management, and is still involved with a major international bank. As Executive Director of CryptoUK, he has built a community of over 100 of the industry’s most influential participants and campaigned for an appropriate regulatory framework in the UK, Europe and beyond.