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Cryptocurrency economy and the threat to traditional financial

03/07/2019
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Lisa Ellis, an expert at MoffetNathanson, is confident that traditional financial institutions underestimate the risks to their business from a cryptocurrency economy. It is able to completely change the public perception of payment and cash flow systems. Visa, Mastercard and PayPal will be the first to be under pressure.

The project from a decade ago takes the lead

Even at the dawn of the emergence of Bitcoin, Satoshi Nakomoto developed it as a single peering system on a decentralized platform. However, experience has shown that the technical capabilities of the early blockchain could not compete with the usual payment systems.

Therefore, the giants of the industry did not take the threat of traditional financial institutions seriously. Representatives of Visa, Mastercard and PayPal have repeatedly stated that the blockchain can not compete with them. And indeed it is. But the situation is changing every day.

According to the plans of the Ethereum network developers, by the end of 2019, the number of operations on the blockchain will increase to 14,000 per second. This is exactly 1000 times more than the year before.

It seems that ordinary payment systems have already reached a ceiling in their development. At the same time, the blockchain has tremendous potential. Against this background, the news about the failure of the American supermarket chain Kroger to cooperate with Visa due to excessively high commissions turned out to be important. Moreover, the place did not remain vacant for a long time, now negotiations are underway with Morgan Creek Digital to transfer payments to the Lightning Network system.

Public finance and cryptocurrency

Immediately, several banking giants announced the creation of their stablecoins to conduct payment transactions. It seems that they understood the potential of new technologies, and the inability to stick to old dogmas. However, this can lead to unpredictable consequences. If financial corporations replace fiat money with their own assets, what will happen to the national economy? The government simply will not be able to find funds for the implementation of ongoing projects.

The US national debt has already exceeded $ 22 trillion. For comparison, the annual budget of the US Federal Government for 2018 will be $ 1.3 trillion.

In fact, now many countries find sources of financing only in emissions. And if investors have alternative opportunities, their economy will be in a deep crisis. The printing press will cease to be a guarantee of stability. Already it becomes clear - sooner or later such a moment will come. And then the consequences will be unpredictable.

Will there be a liquidity crisis due to cryptocurrency

Currently, experts are wary of statements about digital financial assets as a threat to traditional institutions. Not because there is no such risk. And because the picture may be too scary.

It is already clear that the cryptocurrency is able to compete with the usual dollars, francs and rubles. And if earlier enthusiasts were engaged in its development, now banks, stock exchanges and financial corporations have come to the forefront. For now they are creating projects based on fixed rate tokens. But nothing will stop them from changing the policy.

For example, what if JP Morgan once makes the JP Coin rate floating, and offers it for calculations. Corporations from Europe and Asia will do the same. Who will then need a dollar that has already been printed in excess? There are no answers to these questions yet. It is only clear that this scenario is unlikely to be implemented in the coming years.

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