Since their inception in 2008 and subsequent enthusiasm, media attention, delusion, reflection, and continuous innovation, digital currencies have become one of the most interesting and perhaps misunderstood phenomenon of the early 21st century.
In the aftermath of the financial crisis, the shortcomings of existing financial systems became widely criticised, leading to an unprecedented wave of interest in new ways of efficiently executing economic transactions while ensuring high levels of transparency and accountability. The popularity of cryptocurrencies and their potential for ‘disrupting’ and improving traditional financial systems have led to an ever-expanding list of media commentaries, research papers, and policy reports.
With over 2,000 in existence, cryptocurrencies have become progressively embraced by speculative investors and growing market caps, but have yet to be adopted by the wider public as a viable form of money due to practical technical challenges along with a lack of trust in issuing authorities and understanding of how to use them.
This research programme provides a more comprehensive overview of how cryptocurrency could be used for the betterment of society, how they currently function and how the general public use, understand and trust cryptocurrencies across Europe and the Americas.
Understanding how cryptocurrencies could be used for the betterment of society.
Some of the key findings of the report include:
– Modern discussions and debates about cryptocurrencies tend to confuse ‘money’ with ‘systems of payments’ or the mechanism by which transactions are processed and settled;
– Cryptocurrencies have the potential to vastly improve systems of payments if designed and implemented correctly;
– In practice, however, digital currencies are struggling to uphold their creator’s objectives, given that no existing cryptocurrency has been universally successful in fulfilling the role of ‘money’.
– New innovations (stablecoins, proof of stake, Central Bank Digital Currencies) are helping to make digital currencies more realistic candidates to replace traditional money and create benefis for users across large volumes of transactions.
The report also features a unique empirical examination of how citizens understand cryptocurrencies and trust different institutions to issue and manage money across a unique sample of eight countries, including Argentina, Brazil, France, Germany, Mexico, Spain, the UK and the US. It revealed that:
– Knowledge, use, and understanding of cryptocurrencies remains highly limited in Europe and the Americas.
– The vast majority of citizens in all countries agree that money should continue to be issued by central banks.
– While all central banks enjoy a significant trust premium when it comes to the creation and management of money, large differences exists between Latin American countries and Europe and the US.
– A vast majority of European and US citizens do not own digital currencies because they feel they are too risky and don’t perceive an advantage over the currencies they currently use. Our research suggests that countries with a stable history of monetary stability are less open to new types of money such as cryptocurrencies.
– On the other hand, citizens of Argentina, Brazil and Mexico experience lower social trust on central banks and therefore are more open to adopting new digital currencies issued by alternative institution.
– The degree of acceptability and price stability play a key role in determining preferences for holding of money, regardless of who is issuing it.
Furthermore, the report confirms the findings of recent surveys and articles written on the viability of Facebook’s Libra. Consumers’ willingness to trust Libra is overwhelmingly negative, with European and US respondents being much less willing to trust the Libra than other digital currencies. Only 3% of Germans, 4% of Britons, 5% of US residents, 6% of French and 13% of Spaniards trust Facebook to issue and manage a new currency.
For more information please download the “Cryptocurrencies and the Future of Money” report above. Detailed data is also available in the eight Country Reports.
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