Is crypto’s biggest obstacle political?

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It’s no secret that cryptocurrency is struggling to find its place in the world. The problem is not that it has no value, as many people are happy to use it for transactions without converting to fiat currency. The problem is with governments and regulations.

Some believe that cryptocurrency needs regulation, while others believe that regulation of said financial disruptor will only stifle innovation and make matters worse for everyone involved, from miners to investors. This article seeks to explore this idea of ​​what is at the heart of this political or economic debate?

Cryptocurrency in the world

Despite its uses, some countries have accepted cryptocurrency as a legitimate form of payment while others have attempted to ban it outright.

For example, the Chinese government has imposed a complete ban on bitcoin, prohibiting banks from transacting or dealing in virtual currency. The crackdown targets miners who make more money by mining bitcoin and then using it to buy goods online without using traditional payment methods like credit cards or the Chinese yuan.

Meanwhile, El Salvador is the only country in the world to allow bitcoin as legal tender. In June 2021, President Nayib Bukele proposed, and Parliament approved, that Bitcoin be accepted as a form of payment for taxes and other administrative tasks with full legalization to come.

While other countries like the United States, Canada, and the European Union take a more middle-ground stance, here are two groups of countries with two radically different views on cryptocurrency. And so, it would be natural to ask the question: is crypto a political problem? Or is it a perception problem? Well, in truth, it’s a bit of both.

The cryptocurrency perception problem

One of the perception issues regarding crypto is its volatility. Crypto is one of the most volatile investments around today, with some coins going from $ 0.1 to $ 100 in a matter of hours and then back again in a day or two. The lack of government regulation means there are no safety nets for investors who lose money on their crypto investments.

This has led to many extreme highs and lows as well as a riskier overall market. Individuals, in a decentralized market, cannot trust when they will be able to exit without exploding the value of their investments more than it was before entering DeFi (decentralized finance).

However, this does not mean that cryptocurrencies cannot be more stable in the future. The US Central Bank is considering issuing a digital coin. A governor at the institution says if they did, it would be their first major move in more than 10 years and could put them ahead of other central banks around the world that are also exploring this option for currency circulation.

As such, the interest of central banks in developing their own digital currency is a sign of how quickly the financial sector is changing. The introduction of online shopping by PayPal and eBay made it easier to grab items with one click.

Amazon has simplified the way people buy, period. Blockchain-powered digital payment services could be next on our list for disrupting the global growth of e-commerce, making everything more transparent than ever!

By adopting blockchain technology at the federal level, more people will begin to understand and trust the potential usefulness of digital currencies. For example, individuals would be more willing to invest in Bitcoin (and other digital currencies) if they had the financial backing of their national government.

After all, it’s the only driver behind the value of fiat money: users think it’s valuable. With greater community involvement, cryptocurrency prices are expected to largely stabilize, encouraging this market to grow even more. Confidence, however, is only one side of the digital coin. It is also a question of education.

The education gap between investors

There is also a gap between people who invest in cryptocurrencies and those who don’t. In a study conducted by the Monetary and Economic Department, cryptocurrency investments depend on a few factors.

First, the researchers found that people with a higher education (a college degree or higher) are more likely to own cryptocurrency. Likewise, if you are male, you are also around 2-2.2% more likely to invest in a cryptocurrency. Knowledge of cryptocurrency is also higher among people with post-secondary education and higher income.

Based on the above evidence, education and income are jointly linked to owning cryptocurrencies. Unfortunately, this flies in the face of the stated goals of cryptocurrency and cryptocurrency investors to help the unbanked and lift the world out of poverty.

Therefore, in order for more blockchain investment users to increase and cryptocurrency to stabilize, people need to be educated about cryptocurrency and how to use it.

Education in cryptocurrency can be difficult, but it is essential to increase adoption. As people learn about cryptocurrency and the possible benefits of blockchain technology, they will gain a better understanding of why the utility of a regionless, unrestricted, bankless currency.

Unfortunately, governments seem to be leaning towards non-education. For example, with the rapid growth of the crypto space, countries like the UK are still reluctant to add cryptocurrency education modules to the school curriculum.

It is something that we believe needs to be done because it is important for students of all ages and backgrounds. After all, not everyone decides to go to college, or doesn’t have the means to do so.

DeFis accessibility issue

Decentralized finance, or DeFi for short, is closely related, but not exactly the same, as Bitcoin and another cryptocurrency. It is a financial system activated by decentralized blockchain technology.

Fintech companies use this technology to offer savings accounts, loans, enable securities trading, provide insurance, etc. Theoretically, DeFi should be more accessible. But there are still some obstacles in its path.

Unfortunately, not many people actually use DeFi, according to a CoinGecko poll. DeFi protocols have the potential to be useful in a variety of industries, but most people don’t even know what they are.

Low usage rates could also arise depending on how these products present themselves. For example, not providing enough value or being difficult for users to understand may prevent them from using it at all.

What does that mean? Well, that comes back to the point of education presented earlier. People need to be educated about DeFi and how to use it for it to be successful. This will lead to increased adoption as a wider range of demographics trust and understand the usefulness of DeFis.

Therefore, DeFi founders and adopters have a huge opportunity to educate the public about their DeFi offerings. The better governments and DeFi players market and promote their blockchain activities, the faster they can claim dominance in this new technological field.

And by marketing DeFi, they can also increase the overall awareness of the service. According to the same CoinGecko poll, only 11% of respondents said they had heard of DeFi. The DeFis problem is therefore not so much a political problem as a problem of consciousness and perception.

Conclusion

Is crypto’s biggest obstacle political? Well, yes and no. There are political reasons, no doubt, but reducing it to politics would be a limited observation.

But politics play a role. The Chinese government’s outright ban on Bitcoin is enough proof of the role politicians play in the eventual adoption of cryptos. In addition, the refusal of governments to encourage learning about cryptocurrencies is another obstacle. A particularly bad roadblock as it would leave cryptocurrency in the hands (figuratively speaking) of educated people with cash.

But cryptocurrency and DeFi also have a perception problem with the general public. They are considered volatile and a way to lose a lot of money quickly. And let’s not forget how DeFi protocols go largely unnoticed.

With that in mind, users and developers would do well to educate people about DeFi and make sure people know exactly how to access their services and how to use them safely.

Guest post by Ian Kane from Unbanked

Ian Kane is the co-founder of Unbanked, a global blockchain-based financial technology platform. Kane has worked in technology and digital media for over 10 years with a strong focus on business development, sales and strategy. His diverse professional background allows him to bring a unique vision and experience to each challenge he takes on.

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