Can a Cryptocurrency Become the Official Currency of a Country?

The term cryptocurrency has entered our vocabulary in recent years. For some, these new currencies are being deemed as the currency of the future, while others disagree. While some see it as a passing fad that will disappear in a few years, others see it as the long-term replacement for current traditional currencies. So how far can these currencies go?

Cryptocurrency? What’s That?

A cryptocurrency is a decentralized digital currency that uses complex cryptographic algorithms and a protocol called blockchain to ensure the reliability and traceability of transactions.

Cryptocurrencies are entirely virtual; they can be stored in a digital wallet protected by a secret code belonging to its owner. Exchange platforms such as Binance, Coinbase, and Bitstamp are used to buy and resell cryptocurrency online. There are currently more than 1,300 cryptocurrencies. The best known are bitcoin, ripple, ether, litecoin, nem, and dash.

Are Traditional Currencies Destined to Disappear?

Because cryptocurrencies are becoming increasingly important in the economy, many people are wondering if these new currencies will eventually replace traditional currencies. For example, in El Salvador, bitcoin is now legal tender, and the country also plans to install 1,500 machines, giving the possibility of exchanging dollars for bitcoins. Miami has also developed its own cryptocurrency through the “CityCoins” project. This is a program that allows anyone to invest in a city, through partnerships with local governments. Investors are also rewarded in Bitcoin (BTC) or Stacks (STX). California is also reportedly on track to become the second jurisdiction to adopt bitcoin as an official currency. Indeed, a bill giving legal jurisdiction to cryptocurrency should soon be presented by political advisers.

However, there is still a long way to go for cryptocurrencies to replace traditional currencies in the near future. Indeed, a cryptocurrency is not really a currency. Its value is determined solely by supply and demand. As a result, unlike traditional currencies, cryptocurrencies do not rely on a trusted third party, such as a central bank. But could a new banking system better adapted to these new currencies shift the lines? We will have to wait and see.

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