Cryptocurrency and its effects on the US Economy
Cryptocurrency is the electronic payment system that certainly does not require the involvement of intermediaries such as banks. Cryptocurrencies were invented in 2008. Since then, the system has greatly proliferated. In recent years, there has been a rise in the cryptocurrencies, which used to be very few. Also, as time passes, the value of these electronic payment systems continues to decline. With the rise of growth and volatility of the cryptocurrencies, they have ended up drawing the attention of the public as well as policymakers both in the United States and the world at large. The presence of cryptocurrencies has influenced and shaped the current American economy. Cryptocurrencies have become a new trend in the investment world due to their reasonable benefits.
Functions of Cryptocurrencies
Cryptocurrencies act as electronic money in the automated system of payment. Usually, transactions made through cryptocurrencies are validated by a network of computers as opposed to a single intermediary, as it is the case with the real money. During these transactions, individuals use pubic ledgers that allow people to create false names known to the network alone (Vigna and Michael 23). In the case of cryptocurrencies, operations tended to take place once there is a transfer Cryptocurrencies from one account to another using wallet as the service provider. Parties are required to use a private key that allows the authorization of the transactions (Kang et al. n.p).
Usually, cryptocurrencies platforms utilize blockchains technology to validate changes made to the ledger after the transactions (Miraz 235). The primary role of the blockchain technology is to use the cryptocurrencies protocols in preventing any form of invalid manipulations or alterations of the public ledgers. Cryptocurrency protocols ensure the security of all electronic transactions using digital transactions (Kang et al n.p). Cryptocurrencies are the future alternative of physical money, thus allowing customers to engage in worldwide trade for other forms of assets through Cryptocurrency exchange.
Impacts of Cryptocurrencies in US Economy
According to Lehner et al. (145), the majority of the cryptocurrencies are decentralized systems that are developed based on block chain technology. One of the significant impacts is the elimination of the middleman like banks in financial transactions. Unlike the traditional form of money that uses banks and other central institutions to validate transactions, Cryptocurrencies uses decentralized fashion to ensure verification (Asimakopoulos et al. 103). The presence of Cryptocurrencies has wholly eliminated the needs of these institutions, thus making them worried. The electronic money does not need to go through multiple individuals or authorization entities. Usually, in the case of physical money, SWIFT or the central banks act as the middlemen in the international money transfer. Therefore, this makes it easy for anyone using Cryptocurrencies to conduct the transactions. Unlike traditional transactions, cryptocurrencies transactions are always safe and secure (Liu and Apostolos 799). Also, it makes it difficult for the government to regulate financial activities.
Another significant impact of the electronic currency is separating transactions for the dollar. US dollar acts as the research currency for the global economy. Therefore, the mainstream of all global financial transactions is made on the basis of the American dollar. For a long time, this has been the source of American’s global power, while at the same time allowing the nation together with others placing economic sanctions in other countries. Cryptocurrencies do not have any connection to the US government-sponsored currency. Instead, it provides people with alternative methods of engaging in the global economy and at the same circumvent policies of the American economy. Research indicates that another surge of cryptocurrencies in the American economy is likely to result in rapid inflation, recession, and a decline in the buying power (Makarov et al. 295). As a result, people are expected to stray away from using the American currency, thus the decision to shift from the monetary currency to cryptocurrencies. This might lead people to lose hope in the US currency, which has been the dominating currency globally.
The use of cryptocurrencies in the United States has removed barriers to market entry. The electronic currency has facilitated by-passing of the traditional routes of raising capital for crypto-and block chain-related ventures (Bouri et al. 179). They are no longer requires to – convince venture capitalists and banks to invest in their projects. Therefore, they have the ability to by-pass the procedures to ensure that they tape through the initial offering of the coin or ICO.
The use of cryptocurrencies has led to complications in regulating transactions in the economy due to the anonymous nature of the transactions. It is such challenges that previously led to the rise of Silk Road, where people were allowed to conduct illegal transactions before it was shut down by the FBI (Majumder et al 126). Besides, the electronic money makes it easy for American citizens to avoid taxes. Therefore, American is considering putting stricter measures in line with controlling the crypto business.
International transactions have highly increased due to the increasing use of cryptocurrencies. Online transactions have enabled businesses in the United States to thrive even in times of slowdown. This is because businesses can store their assets in the cryptocureency systems, as opposed to the contact transactions.
The US dollar has remained a dominant currency in the world market for decades. With the emergence of the Cryptocurrency, the US dollar is facing extinction and deterioration. Before the emergence of the cryptocurrency systems, more than $580 billion were used outside of the US every year, which implies that the dollar played a crucial role in the world economy. Today, with the introduction of electronic currency systems, most transactions are deemed to follow in this suit. The implication is visible for the US dollar. The cryptocurrency systems pose a considerable challenge for the US dollar. Due to its role as the reserve currency in the world, all financial actors depend upon the US dollar and economic shifts. With the introduction of cryptocurrencies, international transactions can be done without relying on the demands of the US dollar. This implies that the world market will no longer depend on the US economy for financial actors. Due to this reason, the US relations with the international market will significantly shift (Moran 213). International trade, foreign relations, and diplomacy are all on the verge of shifting due to this effect of Cryptocurrency. With all these decreasing aspects of the economy, the implication is that the US economy will undoubtedly decrease due to the decrease of dollar value in the world market. Businesses will start changing their money transactions from the original USD system to these emerging cryptocurrency forms.
New markets in the US have emerged as a result of the cryptocurrency system. Currencies like Bitcoin and Ethereum lead to the emergence of new markets that are under no one’s control. This trend implies that there will be a massive increase in Cyberspace activates. These new markets need handling, and regulation which will be availed through cyberspace activities. Cryptocurrencies ensure low levels of transaction costs, which implies that there is increasing popularity among these currencies as compared to the current trend whereby huge transaction costs are attached to almost every transaction. The result is that new markets are projected to join the Cryptocurrency. The higher the markets developing in the cryptocurrency economy, the more the US economy develops as a result of the enormous benefits associated with it.
Job creation is one of the most significant objectives for most governments in the world. Similarly, the US government aims at achieving job creation for the numerous unemployed youths. Cryptocurrencies are on the verge of creating these jobs, and in the process, helping the US government in the creation of these jobs. Thousands of jobs have been created through the cryptocurrency platforms, whereby all the key players in the business have posted a large number of opportunities for jobs. For instance, Bitcoin posts hundreds of jobs for the youths to access. These jobs are usually paid following the guidelines of the cryptocurrencies and the Bitcoin payment system. The jobs offered by these cryptocurrency platforms range from full-time to part-time. The full-time jobs are availed and concentrated within the US market (Li and Chong 50). Some most relevant jobs in these platforms include; freelancing opportunities for writers and office jobs for regulating and implementing the Companies. Software engineers and other workers have found employment through this new trend. This is a massive benefit for the US economy as the crises of unemployment is on the verge of being solved.
The regulation of cryptocurrency activities proves difficult for the US government. While the cryptocurrencies promise to bring an end to numerous challenges like unemployment, the currency may result in enormous losses for the US economy. Regulation involves ensuring that all the players in this economy pay their due taxes, thus ensuring the government collects taxes. In these currencies, identities of the players in the market are altered and kept secretive; this may result in people evading tax payment (Clautice 3). The US government must put in strict and effective regulations that aim at ensuring that all the people making transactions through the cryptocurrencies pay their taxes. Lack of good regulation policy and systems of ensuring implementation of the same may result in loss of revenue collection for the government. Revenue collection is, to a large extent, one of the leading contributors to the US economy. The revenue is derived from employed people and businesses in the US. With the cryptocurrency trends, most people will shift to this new mode of payment. This trend will see a massive loss of revenue, but with reasonable regulation, the cryptocurrency system may lead to the emergence of greater benefits resulting from higher tax collection.
The Stock market defines, to a large extent, the economy of any nation. Stock exchange markets have also been affected by cryptocurrency emergence. The stock market comprises numerous entities in the American economy, and Cryptocurrency provides a new type of these markets (Button 3). The stock exchange market is a vast system that Cryptocurrency cannot necessarily affect to any great extent. This implies that in terms of contributing to the US economy, Cryptocurrency adds a new market in the stock market.
Due to Cryptocurrency, the prices of essential goods and services in the US may be inflated. Cryptocurrency allows maximum unfixed coin supply, which correlates to the projected economic growth. In most instances, an economy faces deflation or inflation. Cryptocurrency enables users to exchange their currencies between the available forms. This implies that one can exchange between Moenro and Bitcoin. Due to this provision, these cryptocurrency companies may intentionally cause inflation in the economy.
Cryptocurrency allows illegal activities to do transactions through their platforms. Activities of drug dealers, terrorists, and money launders may be acceptable in Cryptocurrency, which is a direct threat to the US government’s stand on these groups. By allowing these groups to transact on the contrary to the US demands, the Cryptocurrency grants them an upper hand in the war on drugs and terrorism (Li and Chong 58). By being able to transact, these groups gain economic advantage through the US territory. The impact is simple; these groups do not pay taxes and may end-up demoralizing the government’s efforts to neutralize them.
New technologies are faced with cybersecurity, and this implies that for cryptocurrencies, the trend is similar. Recently, cases of fraud and cyber-attacks on goods have been reported whereby Americans have lost millions to hackers in the industry. This trend has a negative implication on the US economy at large. Gambling online using Cryptocurrency has rendered many youths poor with casinos, and other trickery mechanisms being used to milk youths of their money. A country’s economy depends on the number of people willing to contribute to the economy by ensuring the flow of money (Button 3). In Cryptocurrency, people are encouraged to make online investments that could lead to huge losses for these individuals. When numerous people undergo losses, the government loses to a great extent.
Cryptocurrency leads to an increased demand for products. Due to the increased monetary activity, the flow of goods increases in the US economy. All industries in the business have a higher demand for their goods from the online consumers wishing to make purchases through Cryptocurrency. This implies that these companies have to hire more people to perform the production duties (Clautice 6). This leads to increased demand for manpower in the industries. Due to this increased demand for goods and services, employment opportunities are created for the American people. For this reason, Cryptocurrency promises to increase the US economy to a large extent.
Cryptocurrency promises to increase the number of economic activities within the US. Currently, a huge industry has already been built around the cryptocurrencies. These institutions are geared towards the supervision of all the world’s digital exchanges (Moran 213). Bitcoin, being the most famous form of Cryptocurrency, gives many businesses and individuals an opportunity to invest through their platform. Most people in the American economy heavily rely on businesses and trade for income. Through Cryptocurrency, these people and businesses are geared to many great benefits. This implies that the economy has to shift in adapting to the needs developed by the emergence of Cryptocurrency. Adapting to this new mode of transactions entails the development of new economic platforms. By increasing economic activities, Cryptocurrency promises to increase the economy of the US. With the low transaction costs present in these systems, people are encouraged to shift to this new trend. Transparency in these financial tools plays a huge role in encouraging people to shift towards them. In essence, through the increased number of people shifting to the cryptocurrency economy, the economic activities of people are increasing, leading to an increase in the general US economy.
Conclusion
Cryptocurrencies are the replacement of physical and traditional money. It is the future of cash where transactions will be conducted purely over the network without the need for a third party. Typically, the rise of the cryptocurrencies and the continued use worldwide has effects on the American economy. For instance, cryptocurrencies are a threat to the American dollar, which for a long time, has been the international currency. The effectiveness of cryptocurrencies as the method of the transaction has made it rise and replace the traditional way of conducting business worldwide.
Works Cited
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