The 2008 financial crisis led to consumer confidence in financial institutions decreasing, and consumers sought alternative ways to store and keep safe their valuable asset of money. The financial crisis consequently led to the emergence of cryptocurrency; a form of tender that is unregulated and falls outside the control of financial institutions and the central banks hence, circumventing traditional financial markets and regulation.
In recent years, one of the biggest challenges of cryptocurrencies is public confidence. Crypto-trading is frequently regarded as a risky activity, and not just because of the volatility. There have already been instances of fraud and technological vulnerabilities on a number of exchanges. Were there to be a much larger failure, this would trigger a confidence crisis, whose repercussions would be global.
Some of the adoption problems that face the cryptocurrencies are:
- The regulators’ denial to accept the anonymity of cryptocurrencies – One of the major problems (and in many respects advantages) of cryptocurrencies is the anonymity given to individuals who undertake a transaction. The transaction itself might not be anonymous, but the person completing the transaction cannot be identified because they are only defined in the given algorithm; its pseudonymous. Naturally this poses a major challenge for regulators seeking to prevent money laundering activities and today this is one of the major factors that has prevented governments from openly adopting cryptocurrencies.
- The challenge of tax evasion – In light of the anonymity given to cryptocurrency traders, authorities frequently struggle to discover the annual earnings of entities and individuals in cryptocurrency trading. With this issue, many state regulators are still looking for ways to collect taxes on cryptocurrency-based transactions.
- Apprehension on the side of the consumer – Many consumers and organisations are still wary of the anonymity of users and therefore they are not ready to engage in any kind of transaction that has to do with cryptocurrencies. This is believed to be the most factor currently holding back the adoption of new crypto-payment systems.
Notwithstanding that apparent concerns, through standardising the security techniques and methodologies used by crypto systems around the globe, users will be able to make educated decisions more easily about which products and services to use and with which companies they wish to align.
In recent months one such government that has adopted this philosophy is France, as it was announced that France plans to create a legal framework for raising funds via cryptocurrencies and it aims to become a leading centre for digital currency offerings.