Cryptocurrency is an electronic payment mechanism that does not depend on banks for transaction verification. It is a peer-to-peer system of payment that enables anyone from any location to send and receive money. Bitcoin payments appear as digital records in an online database that describes individual transactions. Cryptocurrency is kept in digital wallets, and transactions are tracked on a public ledger. Advanced coding is used to store and transfer cryptocurrency data between the wallet and a public ledger, and encryption is used to confirm transactions. The transactions are encrypted to ensure safety and security.
Bitcoin is the most common and valuable digital money today. It was the first cryptocurrency to be developed in 2009 (Gailey&Haar, 2022). Bitcoin is a substitute for monetary systems regulated by central banks and governments like the U.S. dollar. A proof-of-work collaboration technique is used to validate transactions. Bitcoin miners strive to validate transactions using powerful computers to solve challenging mathematical calculations (Gailey&Haar, 2022). Bitcoin is perceived as a recreational asset for speculation and trading, while others feel it has the potential to become the world’s currency. There is no doubt that Bitcoin’s fame has skyrocketed since its birth, but the era has also revealed fundamental faults in the most popular digital commodity in the world.
Cryptocurrencies are based on blockchain, a decentralized ledger that keeps track of all transactions that are updated and maintained by currency owners. A decentralized ledger ensures that blockchain technology offers faster payments and lower fees compared to banks. I think Bitcoin coin dismantle the banking system as it will lose control of the banking systems. Even though the sector of cryptocurrencies is becoming more popular, traditional institutions are hesitant to embrace these digital assets because they believe the inherent hazards exceed the potential advantages (Duggan, 2022).
On the other hand, regulatory bodies are striving to shift banks’ perceptions of digital currencies, thinking that these assets may propel financial institutions into a new era of innovation. Several financial institutions are hesitant to use it because there is no regulation and guidance around digital assets (Scicchitano, 2022). Concerns about the stability and security of cryptocurrencies also prevent banks from pursuing the market. However, banks should consider the possible benefits.
Legislators in Washington, D.C., and worldwide are debating on creating regulations and standards to make cryptocurrencies secure for investment and less enticing to hackers. Due to the recent crash of the Terra Luna in which investors saw their assets disappear in a couple of days, the U.S. authorities have expressed interest in regulating stable coin (Scicchitano, 2022). Strict regulation may be implemented to safeguard investors following the disastrous events in the cryptocurrency market in recent weeks.
Although work is still to be done, 2022 has seen significant regulatory movement. Earlier in the year, President Joe Biden issued an executive order directing federal agencies to investigate the sustainable growth of digital assets (Scicchitano, 2022). Since then, the United States Treasury Department has issued the first framework outlining how the United States should collaborate with other governments on digital assets. Proper regulation would remove a significant obstacle for bitcoin, as U.S. corporations and investors are now operating without clear standards.
In conclusion, cryptocurrencies are being questioned as the money of the future. It remains to be seen if it will eventually replace actual currencies, but it has shaken the financial market. Its regulation may provide excellent stability to the famously volatile cryptocurrencysector. Regulation will safeguard investors, prohibit fraudulent activities, and give clear instructions that allow enterprises to develop in the digital economy.
References
Duggan, W. (2022). The History of Bitcoin, the First Cryptocurrency. Usnews. Web.
Gailey, A. &Haar, R. (2022). The Future of Cryptocurrency: 8 Experts Share Predictions for the Second Half of 2022. Nextadvisor. Web.
Scicchitano, M. (2022). How Cryptocurrencies May Impact the Banking Industry. Wolfandco. Web.