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The role of cryptocurrency in the global economy

Let's talk about cryptocurrency’s role in the global economy 1st know what cryptocurrency is.In simple words, The term "cryptocurrencies" refers to "decentralized digital currencies" that work on blockchain technology. This currency is not governed and controlled by a central bank & It is only a medium of exchange. Blockchain technology, which is used by cryptocurrencies, serves as an electronic ledger for discrete online transactions. Crypto mining is necessary to maintain the ledger of transactions upon which cryptocurrency is based. 

Everything began in 2009 when Bitcoin was first released and used to make its debut purchase of two Papa John's pizzas. Since then, more than 15,000 different types of digital currencies have been added, and the market valuation worldwide has risen to an astounding $2.65 trillion. So now we can see how big the crypto or digital economy is. 

Examples of cryptocurrency:-

Bitcoin, Ethereum, Tether, Binance Coin, USD Coin, XRP, Terra, Solana, Cardano, Avalanche, etc.

How does cryptocurrency impact the global economy?

if we talk about the impact of cryptocurrency on the global or Indian economy so, we can say that, and We cannot conclude that cryptocurrencies have a significant effect on the international monetary system even though their use is still quite limited despite rising transaction volumes and market values. Cryptocurrencies need to be used as a replacement for fiat money to reach the volume that will have an impact on the financial markets. Cryptocurrencies are retained as assets and are regarded as an efficient tool for aggressive diversification because they have the lowest level of correlation with traditional market instruments. The portfolios are protected from possible dangers by this hedge. It is the primary factor behind the increase in crypto transactions across a range of exchange-traded products. Governments of various countries react to cryptocurrency in this way the US, Australia, Singapore, and Japan, have embraced this new development and have been actively attempting to regulate the system, while nations like China and Russia have openly banned cryptocurrency trade within their borders. India recently enacted a 30% tax on the transfer of cryptocurrencies. Additionally, many other countries are creating or considering creating their form of cryptocurrency, known as the Central Bank Digital Currency (CBDC).  

However, governments still vary on this concept given the concerns posed by a largely ungoverned market, with volatility risks and increased illegal activities.

Additionally, cryptocurrency has positive and negative impacts if it becomes a global economy. 


Some positive impacts

1.Facilitate Global Financial inclusion:

Cryptocurrencies don't have any geographical restrictions. The crypto-based economy aims for universal access for everyone, regardless of nationality or socioeconomic standing. Over 1.7 billion people worldwide who have remained unbanked or underbanked can now access essential financial goods thanks to the global financial inclusion made possible by cryptocurrencies. According to estimates, emerging economies' annual GDP will increase by $3.7 trillion.

2. Decreased transactional expenses:

Crypto does not have many transactional fees so it reduces transaction costs. However, mediators are no longer required, and very low transaction costs are incurred. Which in turn increases the volume of transactions which is good for economic globalization.

3.  Decreasing the need for Banks as payment facilitators:

At present, if we transfer money you must make a request and forward it to your bank. The bank subtracts the balance and deposits the money into the beneficiary's account. By doing this, the bank "facilitates" the payments. But with cryptocurrencies, completely unnecessary Cryptocurrencies are widely acknowledged digital money that can be readily transferred from one person's account to another without the use of a middleman.

4.   Impact on Global Investments:

Cryptocurrencies are anticipated to be used initially as a speculative vehicle or as a hedge against inflation. One of the reasons investors are lining up to participate in the activity is their perception of their protection against inflation. One of the main drivers of the expanding trend of investments coming into the global crypto industry is the promise of anonymity and lessened regulatory supervision.

5.  A new dawn for the field of digital art:

Future growth prospects for the digital art business have improved as a result. The engagement and interest of auction houses like Christie's have also given the sector much-needed credibility.


Some Negative impacts

1..Tax loosing :

Governments all across the world have made strides toward taxing cryptocurrencies. For instance, India has instituted a flat tax of 30% on earnings from transferring virtual currencies and other digital assets.

2. Lack of regulations:

For cryptocurrency, there is no regulatory body to control it. Because crypto work on blockchain technology so there are many people has access. And legality is also in doubt, and some countries are not giving it legal status. However, people don’t trust that much, they should have.

3. The Danger of Anonymity:

Even though investors from all sectors appreciate cryptocurrencies due to their perceived anonymity, some worry that this same anonymity could facilitate unlawful acts like:

The drug trade, money laundering, and terrorism financing.

4. The world's markets with extremely high volatility:

In actuality, cryptocurrencies like Bitcoin have a very volatile character. One reason why governments are hesitant to trust cryptos is this. Take Bitcoin as an example. It might be worth $45,000 in a moment. It reaches $35,000 a little while later. This turbulence is too intense. If a cryptocurrency were to gain widespread acceptance and become a widely used global currency, its inherent volatility would make the entire system unstable.


Lastly, The financial influence of Bitcoin and other currencies must be considered, although the history of cryptocurrencies is still in its infancy. A successful alternative to the global financial system has been developed in a short amount of time. We do not yet know how these outside influences will affect the global financial system as a whole or how they will disrupt the delicate balance between the various world powers. One thing is sure: it is currently impossible to stop the growth of cryptocurrencies. On the other side, it is more likely that they will be regulated and used by people all over the world, from small-scale citizens to global governments.

– by Monika Gupta


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