The COVID-19 pandemic is making cash-based societies all over the world sink into oblivion with the help of decentralized technologies.
Technology has always been one of the main drivers that has boosted social changes. Of course, there have been other reasons: wars, natural cataclysms and disasters, plague pandemics and more. Speaking of such, the current COVID-19 situation, being a once-in-a-century type of pandemic, has come at an inconvenient time. But the time is never right.
However, what happened in late 2019 made an impact on various industries to a level that can hardly be estimated at the current moment. The losses and negative aftermaths are imminent, and the use of cutting-edge technology may shine some light during this period of looming darkness. Digital currencies, which had previously been raising controversial questions, now see high demand both from ordinary users and institutional investors. What couldn’t be changed naturally for a long time has shifted fast during the crisis. Global adoption of digital payments and cryptocurrencies has already started.
From old traditions to new trends
Ongoing changes in social interactions may become irreversible, changing the world forever. The life of humanity has become even more digitized, and we are witnessing an accelerated transition to a cashless society.
Ongoing advancements such as 5G tower rollouts worldwide have caused an increase in conspiracy theories and even led to savage acts of arson, as some believe they are closely tied to the current pandemic. The development of society has always been tied to a certain amount of risk. The world differs in its views on technological progress. While some countries in Asia, such as Japan, have always spearheaded robotics and new developments, others have remained true to old traditions, hardly accepting the changes offered by progress.
In Europe, the pace of change has been accelerated due to the horrific numbers of diseased people. Suddenly, everyday things such as paper money have transformed into dangerous items that can bring death. Cash-loving European citizens have started to use cards more. For example, Germans have switched massively to using digital payments as credit card transactions have surged for the first time in the country’s history.
Besides, the virus has caused a drastic increase in the use of financial technology applications in Europe and the whole world, as more people now work or conduct commercial operations remotely.
Moreover, the road to mainstream crypto adoption has begun, as institutions have stepped in, in a big way. The interest from the population is also growing. For example, a survey conducted by the European branch of the bitFlyer crypto exchange based on 10,000 respondents across 10 European countries revealed that 2/3 of the local population thinks that cryptocurrency is here to stay.
Leaving physical money behind
The incentivization of interest from global players has also contributed to the transformation of society and crypto adoption. We now see that some people that have gained help from the government during the pandemic have spent it on Bitcoin (BTC). Institutional investors are highly interested in something that can protect them from risks, and it means that more and more investors will take a look at the crypto market over time.
The growth of the crypto market and demand for this new kind of money has become even more noticeable during spring 2020. Bitcoin ATM locations have surged to over 8,000 worldwide amid the global crisis, institutional investors are coming to decentralized finance, and even the crème de la crème of finance such as Paul Tudor Jones regard crypto as an instrument for risk diversification, thus marking a clear signal for others.
The global view on crypto has shifted from a “geeky asset for speculation” to an “asset that shelters from crisis.” The trust is hard earned, and blockchain can offer trust quantification of a yet unprecedented level.
It’s clear that digital money is safer to use for any kind of payment — a quality that one would have rarely considered as more than just a convenient feature before the pandemic — and stablecoins are the best tools that can be taken out of this particular box.
And stablecoins have experienced higher demand — Tether’s (USDT) market capitalization in the last few months has significantly increased, becoming the third-largest cryptocurrency — and this number is more than the amount issued between all of 2015 and mid-2019!
Meanwhile, speaking of regulated approaches to cryptocurrency projects, we don’t see much progress. The European Central Bank’s approach to stablecoins still remains analytical rather than a practical call to action.
The regulators and the United States Securities and Exchange Commission tend to hamper crypto ecosystems such as Libra and Telegram. While the latter quit the game and dropped its guns just recently, the fate of the Facebook-led initiative is still unclear.
As for government-issued stablecoins, competition still remains sluggish as China leads the race with the digital yuan program. The U.S., however, has incentivized the creation of its kind of central bank digital currency as Congress has seen a new bill introduced that mandates the implementation of digital dollar wallets by Jan. 1, 2021.
By mid-spring 2020, central banks had recommended banning stablecoins as they pushed for heavy-duty regulation of centralized, privately issued global stablecoins and considered prohibiting decentralized ones. While some countries are embracing and fostering innovations, others tend to be hostile toward cryptocurrencies, restricting or totally banning Bitcoin and crypto operations.
Finally, the European Central Bank is looking to renovate its payments infrastructure, studying both public and private solutions, with or without blockchain.
It’s clear that the distributed ledger technology topic is of interest, and the technology is there, but Europe is way ahead of the U.S. when it comes to experiments with stablecoins that may be backed by governmental bonds. Regulatory bodies worldwide enjoy watching private companies experimenting with this business model. Paving the way to its legitimization is possible in the form of an e-money version 2.0.
Digital asset domination is imminent
The coronavirus pandemic’s impact on the economy is hard to evaluate, and the changes triggered by the pandemic are here to stay for a long time. Society will further transition to digital solutions and remote workplaces, which will ultimately change the living landscape, shifting from cash to card payments and from card payments to crypto.
In 2020, apps for cryptocurrencies have become advanced enough to enable the purchase of digital currencies with just a credit card, allowing for the sending of small amounts of money even without the need for Know Your Customer protocols. Stablecoin wallets are in high demand, and this evident trend is no more a millennial-only kind of thing.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.