Cryptocurrency vs Fiat Money: Can they coexist?

Crypto vs. Fiat: or Coexistence?

With the crypto sector exponentially progressing, many have wondered about the coexistence of cryptocurrency and fiat money and the future together. I will be talking about both sides of the crypto vs. fiat debate whether cryptocurrencies and fiat money can coexist or not in detail.

Crypto vs Fiat Money: Coexistence is possible

Technically, there is a fair possibility that cryptocurrency can coexist. Since the value of cryptocurrency is measured in fiat, and fiat is becoming increasingly digitized as we march toward a cashless society, their ecosystems are rapidly integrating. Moreover, there is a lot of conjecture about crypto replacing fiat currency to the extreme side.

Central Bank Digital Currencies: CBDCs

Cryptocurrency inspired central banks to establish their own digital money in their national currencies, but solely in numerical form. Some banks, such as Sweden’s Risbank and the BCE, are researching “Central Bank Digital Currencies” or CBDCs to determine whether there is an approach to develop them. It will not use the same technology as Bitcoin, but it has impacted them significantly.

Crypto Vs Fiat: The Other Side of Argument

Now let’s discuss the other side of the argument of crypto vs. fiat. While the coexistence of cryptocurrencies and fiat money is a hopeful statement to make, numerous hurdles realistically occur, making the coexistence very difficult to happen.

Crypto Market Risks

Liquidity issues might arise with cryptocurrency, and restricted ownership makes it vulnerable to market manipulation. Furthermore, crypto money can appear more volatile than other physical currencies, driven by speculative demand and exacerbated by hoarding. However, to address this risk, cryptocurrencies are an “emerging market” in the idea that they are relatively new and hence do not yet have all of the established functionalities of mature financial markets.

Crypto Business Risks

The cryptocurrencies’ promising nature makes them prone to a lot of uncertainty. Speculators aiming to benefit from long-term or short-term holdings of cryptocurrencies are active on online platforms in large numbers.

Crypto Regulatory Risks

The absence of coordination and transparency on regulatory, financial, tax, and legal handling of cryptocurrencies, and this asset class in general, is another big risk. This is understandable considering the market’s development and the frequently delayed and sluggish nature of “regulatory catch up.” Crypto legalization and regulation over the globe could be a way to address this risk.

Environmental Concerns

Due to a large amount of power needed to mine the coins and verify the transactions, environmental concerns may also hamper the rise of cryptocurrencies. But it is still trusted that cryptocurrencies are unquestionably here to stay as technology improves.

Crypto vs Fiat: Conclusion

The cryptocurrency market works in tandem with the fiat market, and businesses that leverage both systems’ characteristics gain a significant competitive edge. Not surprisingly, the biggest names in the fiat and cryptocurrency sectors are banding together to give businesses and individuals even more options through new multipurpose solutions. The winner of the crypto vs. fiat debate can’t be decided right away. However, the future is hopeful for the crypto sector if the hurdles and risks are addressed by solutions

A blockchain enthusiast and entrepreneur’s musings on the next big revolution since the Internet.