Cryptocurrency and its effect post pandemic
In cryptocurrency and blockchain, the past year has been important. The cryptocurrency saw an increase in fraud and abuse litigation in 2019. Investors were recording losses of more than $ 4 billion to malicious actors (a significant increase from the previous year). Meanwhile, the blockchain has seen an increase in interest from major companies. And now we see even more momentum around how organizations are applying cryptocurrencies and blockchain to address some of the public crises emerging from the COVID-19 pandemic.
We will see 2021 as a time of great change. The adoption of cryptocurrencies is likely to increase as governments and financial institutions turn to digital currency. They will use it as a means of distributing aid and other financial services. Sourcing the medical, pharmaceutical, and other industries can take a closer look at how distributed ledger technology can solve some of the problems we’ve seen in critical goods distribution and supply chains. Industry observers are likely to continue to see a slight increase in cryptocurrency investigations and litigation.
I have compiled a list of predictions and expectations. It will help indicate what will take shape in these areas over the next year and in a post-coronavirus world. These include:
1. Legislative activity on cryptocurrencies, but no new laws
Last year, I expected the first formalized cryptocurrency regulation to come true in the new year. Just in time, the 2020 Cryptocurrency Law was brought to the Chamber. It kicked off the New Year with renewed energy and a focus on cryptocurrency law and policy. Additional bills are in process. This year might bring an increase in legislative activity around space. However, this does not mean that we will see the passage of new laws. Instead, I think the legislative champions of cryptocurrency will primarily focus on educating and informing their colleagues through bills. They could bring new discussions to the table to raise awareness.
2. Public banking authorization
In New York City, a team of politicians and a law professor drafted a bill. This bill proposed what they called an inclusive value ledger (IVL). It was designed to provide public banking services to millions of people. They might have no access to bank accounts or have low income. This system would allow users to store money digitally and transfer money to other users for free.
As part of the plan, New York State would issue digital wallets to every person (and business) in the state. They would also provide everyone in New York with the ability to transact. This will be done by using a public digital currency across the state. We have seen a pull around this concept in the United States and around the world in response to the coronavirus.
Ultimately, this could become a way to level the banking world and potentially serve as a model for governments and businesses seeking to protect people from abusive loan and check cashing services.
3. Blockchain connecting nations
Blockchain is already in use in Asia to track coronavirus-related financial aid and donations to businesses and individuals. For example, insurance companies would use it to speed up claims settlement. These use cases demonstrate the technology’s capabilities to securely track, record, and share sensitive financial information. Similarly, I hope that governments will take advantage of blockchain systems to track other critical data regarding the global spread of the virus. It is possible that in the next year, a global distributed ledger database will be implemented to share research, ensure data accuracy, and promote information transparency between organizations. Foreign entities, possibly with the aim of improving the response to the coronavirus and the global future. crisis.
4. Increased adoption in financial services
The use of cryptocurrencies can continue to mature rapidly, especially among traditional financial services institutions. This year, I think we will see that digital currency will be more used by the public, in retail, at ATMs, and in mobile applications, especially when people are looking to conduct contactless transactions. (The World Health Organization would ask people to use contactless payment methods as much as possible.) Banks and retailers could increasingly jump on the token train, and cryptocurrency portfolios of companies could emerge to offer new features and protections to drive usage across businesses.
5. Fraud is still “business as usual”
As mentioned above, 2019 was a pivotal year for a cryptocurrency crime. In November, two Massachusetts men were arrested and charged with cryptocurrency theft, SIM card swapping, and hacking. Although SIM card swapping has been around for a long time, its potential for use in mobile banking fraud appears to be increasing. Both commercial users and consumers of cryptocurrencies should expect to see (and protect themselves) more of this tactic.
6. Corporate Cryptocurrency demonstrating return on investment
Beyond use cases to improve vital supply chains, enterprise blockchain could continue to make great strides and drive innovation and disruption in many business processes. This could include blockchain as a viable solution for smart city initiatives (paywall), consumer products, and supply chain disruptions. More blockchain companies are likely to enter the market, and early adoption pilots could start to show a return on investment and other measurable benefits, leading to increased adoption and interest. For example, in the media space, a company uses a blockchain platform to “enable content producers to manage and distribute premium videos to consumers and business partners without content delivery networks.” In the insurance arena, a leading provider would use the blockchain to allow “patients to securely access and share their medical data.”
One year after the start of the pandemic
The market appeared to have exploded. For example, when the pandemic broke out, Bitcoin, the world’s first cryptocurrency, could be bought for around $ 7,300. Today, the same token costs more than $ 46,800, a staggering 640% increase. Other leading cryptocurrencies (for example, Ether), have shown similar (if not greater) increases. However, this upward trend is not necessarily obvious from a theoretical point of view. Various forces can cause demand to rise or fall in response to a crisis.
A set of forces is leading to potentially higher demand for cryptocurrencies during a pandemic. The fact that we can trade cryptocurrencies from anywhere in the world alleviates, to some extent, the potential liquidity constraints that can arise if local governments restrict business activity as part of the foreclosure. As a result, cryptocurrencies have become more attractive than alternatives. Furthermore, investors who fear that a crisis could cause central banks or political actors to interfere in the market may prefer to shift their investments to the decentralized crypto market. In other words, because a central entity does not manage cryptocurrencies but they operate automatically, they can allow investors to hedge some of the political risks and thus become more attractive.
But other countervailing forces can reduce demand. Cryptocurrencies closely correlate with traditional financial markets during times of crisis (although there is no such correlation in normal times), so the benefit of switching to crypto is negligible.
The chaos caused by the pandemic
The pandemic could lead to at least two dangerous activities that can cause substantial losses.
- First, sophisticated investors can manipulate the price of cryptocurrencies (pump and dump systems) artificially increasing demand to attract unsuspecting investors and then abandon their holdings once the price is sufficient. It seems plausible if people exhibit herd behavior, that is, they buy cryptocurrencies simply because they are watching others do it.
- Second, even before the pandemic, cryptocurrencies were suspected of facilitating criminal activity. So the same characteristics that make cryptocurrencies attractive during a crisis also make them lucrative for criminals (especially if the crime is more attractive amid the chaos of the pandemic). By anticipating this, people may fear that the use of crypto will expose them to criminal charges of money laundering and thus avoid trading.
We now know that the cryptocurrency market has thrived. So, the first set of effects seems to have dominated in the long run. However, much of the uncertainty surrounding Covid-19 has been resolved. For example. vaccines have been developed and medical treatments have been improved.
As with all other disruptive technologies, the game of new challenges, new advancements, and new laws will likely continue as the blockchain and cryptocurrency space matures. Despite some challenges, such as unfamiliarity with technologies, I believe it is time for organizations in all sectors to turn to innovation. They need to think of ways to do this. They can do it by prioritizing process optimization, new business opportunities, and yes, creating a better world.