I was just reading a digital currency article (Is the world ready for digital money? Experts debate the issues) by Laura Singleton, Imperial College London and couldn‘t help but be impressed by the strides digital currency has taken since first developed and how quickly the whole digital currency ecosystem has matured.
What is digital currency?
Digital currency is a form of virtual currency that is electronically created and stored and is transferred electronically. Some types of digital currencies are cryptocurrencies, but not all cryptocurrencies are considered to be digital currencies.
A subset of digital currencies that uses cryptography for security so that it is extremely difficult to counterfeit. A defining feature of these is the fact they are not issued by any central authority.
A type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community. In other words, it only exists within the virtual world.
If we look at the past 1,000 years, many different forms of money have revolutionised society and we are now entering the advent of electronic money, which is likely to have the greatest social and economic impact on the world
Naveed Sultan, Global Head of Treasury and Trade Solutions at Citi
Why should you care about digital currency?
Digital currency is no longer confined to a small groups of techies or gamers. It is now becoming globally acceptable, and its popularity is steadily increasing due to the fact that:
- It can be transferred using less infrastructure than traditional currencies, and with fewer service fees.
- A virtual currency could also be safer than using a regular credit card for online purchases, because it is not attached directly to any bank account.
- At the moment, there is very minimal government interference.
What will precipitate mass adoption of digital currency?
Despite the progress made, there are still lingering doubt for a lot of people on the viability of digital currencies. More needs to be done to improve the digital money readiness and driver adoption. This is indeed a monumental task. Citi and Imperial College London did a study detailing the Digital Money Index of about 90 countries and categorized the results as follows:
- The “Incipient” (or least ready) quartile saw the highest improvement in readiness on average. Investments in information and communications technologies infrastructure and higher ICT affordability are the driving force coupled with favorable regulation that has encouraged private sector competition and resulted in private sector investment in the markets.
- In the “Emerging” quartile, most countries (but not all) have addressed ICT penetration and affordability. Improvements in the ease of doing business, coupled with local innovation and entrepreneurship have been key in driving digital currency use.
- The top two quartiles — “In-transition” and “Materially Ready” — are characterized by increasing consumer propensity to adopt digital currency solutions and the continued evolution of industry-specific use-cases.
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However, the industry still needs to contend with the following impediments in the digital currency ecosystem that could potentially see a lot of startups loose their competitiveness:
- Anti Money Laundering regulation and the Know Your Customer challenge
- Price Stability – previously, price stability was only accomplished through government intervention and shutdowns.
We can’t wait to say goodbye to paper money. However, until that day comes, more needs to be done to ensure that digital currencies flourish. What’s your take on digital currencies? Have you used digital currencies in the last 12 months?