Cryptocurrencies are known to us primarily as one possible form of investment. Most of us buy them with the intention of reselling them later at a higher price or for the purpose of playing casino games, by the way, you can go to Bitcoin casinos in Japan by Qyto to try it for yourself.
The current definition of cryptocurrencies by the European Banking Authority (EBA) defines them as a “digital representation of value” not issued by a central bank or other public authority and accepted by people or companies as a means of payment. In most countries, coins are not recognised as currencies in the traditional sense, but we are increasingly hearing of more countries that are more open to the idea.
Towards the digitalisation of money
The best example of this is El Salvador, which recently became the first country in the world to adopt Bitcoin as an official currency alongside the US dollar. Using digital wallets to transfer bitcoin, in a way that is independent of traditional banking, could be a viable alternative for many people without a bank account. Another example of the use of crypto assets was pointed out by the Bank of Singapore, which signalled that Bitcoin has the potential to replace gold as a store of value in the future.
The topic of state-owned digital currencies (CBDCs) has also been in the public eye recently
The European Central Bank announced in September the launch of a two-year study on the digital Euro. The closest to introducing a CBDC is China, which has been very quick to recognise the potential of blockchain technology. The digital yuan had already been under development by the People’s Bank of China since 2014, when one Bitcoin was worth less than a thousand dollars. However, it is important to distinguish that cryptocurrencies, unlike digital currencies, use blockchain technology to remain decentralised. Digital currencies also use blockchain, but ultimately the entire system remains under the control of centralised state bodies.
In addition, the European Commission has started work on a regulation on cryptocurrency markets
(Markets in Crypto-assets Regulation, or MiCA for short). The idea is to regulate crypto assets and create a single European market. An EU pilot system for innovative blockchain solutions is also planned. Confirmation that the EU has recognised the potential of digital finance and intends to support its further development are the words of Ursula von Der Leyen during the State of the Union address. The President of the European Commission (EC) said, among other things, that digital transformation is now one of the most important elements in building a strong.
The EU also noted that blockchain is not just about digital assets and has started work on applying the technology in many other areas.
Cryptocurrencies as a payment method
In addition to acting as a store of value, cryptocurrencies can also act as a medium of exchange. Thanks to the potential of blockchain technology, a huge range of possibilities for their use are emerging, beyond conventional financial transactions. Although cryptocurrencies are not yet widely used by businesses, companies are beginning to increasingly accept them as a means of payment. Already, established brands such as Microsoft (for its Xbox Live and Skype services) and Starbucks have done so. Some companies, such as Google and Amazon, are planning to create their own cryptocurrencies for transactions involving goods and services they provide. Payment provider PayPal enabled its US customers to transact using Bitcoin in March this year, and is now introducing a similar offering in the UK. The company has even announced that the aim of further expansion of its services is to support the popularisation of cryptocurrencies and even make them mainstream.
Cryptocurrency enthusiasts already use their cryptocurrencies for regular payments, from paying for their morning coffee with Bitcoin to paying their bills with Ethereum. That’s why we created the Bitpanda card, which allows Eurozone residents to make payments for purchases with digitised assets, including cryptocurrencies, fractional shares or precious metals.
Financial services without intermediaries
Another example of the application of the trend of democratisation of the financial world is the DeFi (decentralised finance) market. It uses blockchain technology, allowing all transactions to take place without the supervision of international financial institutions and organisations. The concept of decentralized finance assumes that it is possible to transfer any financial service to the blockchain network. Consequently, thanks to DeFi, users from all over the world are, for example, able to conclude a loan agreement without the involvement of a bank or other intermediary – anonymously, accessible to everyone and fully secured by blockchain.
This digital revolution has been made possible by so-called smart contracts, or smart contracts, created on the blockchain network
Programs, that run automatically, work by performing a certain function when a certain event occurs. For example, when buying a given cryptocurrency, a record of the change of ownership automatically appears on the network. Smart contracts therefore work practically the same as ordinary, traditional contracts. However, they are subject to much faster verification and completely eliminate the element of bureaucracy.
The process of adopting cryptocurrencies and DeFi may still take some time, as blockchain, as a still relatively new technology, is still being developed
However, more and more countries and institutions are realising the value of blockchain technology and are putting effort into regulating it in a secure and useful way. The future has arrived and it is up to us how we use it.