The Coronavirus Pandemic: A Growth Catalyst of the Cryptocurrency Era?

As the Coronavirus pandemic is ravaging both the rich and poor countries around the world, there has been a growth in demand for a shift in digital transactions. With social distancing and quarantine measures enforced in different forms, the general public is demanding heightened levels of privacy when it comes to securing private and public finance. By the time every country picks up the pieces and rebuilds its economy after the pandemic, the shift towards cryptocurrency makes financial sense.

Many experts say that cryptocurrency is the promise of a more open and dynamic financial system that is accessible anywhere in the world with instantaneous fund transfers, lower transfer costs, and highly-secured consumer privacy protection.

By the time we all move on from the pandemic, global finance would have been on a different landscape by then. Businesses would adapt to the new normal as the financial system goes towards digital commerce together with the adoption of stringent consumer financial and privacy protections. Different countries may start adopting digital versions of their national currencies and even perhaps a more stable transnational cryptocurrency.

Countries that are considering the idea of implementing a comprehensive cryptocurrency policy would probably try to balance law enforcement, cybersecurity, privacy, innovation, and economic competitiveness.

Historical Perspective

Cryptography and encryption have a very long history, they played a big part in the secret communications used in World War 2 and the Cold War. It was only in the late 90s when these technologies became accessible to the consumer with the advent of the Internet and smartphones. Nowadays, every online activity and communication is utilizing these technologies one way or the other in order to protect credit card numbers, passwords, and other personal information online. Encryption has made its way to financial services and e-commerce.

As a majority of our Internet traffic is now encrypted, we can see a closed lock icon in our browser before entering our personal information. Private messaging on WhatsApp, iMessage, and Telegram are now protected so that they can't be tracked by third parties. However, some companies are collecting private information from customers and often end up in online databases that hackers can gain access to. Data breaches are a big concern even with the promise of privacy security in cryptocurrency.

Perfect Solution?

Cryptocurrency has always been envisioned as a future solution. Many people have erroneously assumed that blockchain was anonymous money. In fact, blockchain uses a public ledger that records every digital trail of every transaction. Even cryptocurrency exchanges have implemented strong anti-money-laundering and KYC programs that even rival major banking and financial institutions. 

In recent years, cryptocurrency technologies, particularly consumer privacy, have grown to higher levels.

1. 'Privacy coins' offer protocols that make every transaction virtually untraceable. It may make things secure but it will be difficult to trace dubious transactions.
2. 'Non-custodial cryptocurrency wallets' allow users to store their own private keys instead of relying on a third party. As these wallets are not actually storing funds, they are positioned as software companies rather than financial institutions in order to avoid regulation. The wallets are gaining widespread use in the mass market in recent years.

Future Use

Even with the innovations in cryptocurrencies, financial regulators and banks seem to have been alarmed by this new platform. As much as the Internet needed encryption for e-commerce to work, cryptocurrencies need privacy protection to reach their full potential. Whatever the case, the effective way to ensure hack-proof financial data is to avoid collection in the first place.

Improving financial protections does not mean that criminals will have free rein. Regulators will have a wide selection of tools at their disposal from subpoenaing cryptocurrency exchanges to examining conversions of fiat currencies.

We are living in a free society where it is our right to demand and expect privacy protection. Love it or hate it, cryptocurrencies are a catalyst of growth to our financial services as the global economy tries to rebuild after this pandemic is over. Let's allow this technology to grow and thrive.