Will Cryptocurrency Replace Fiat Currency?

This article explains the differences between fiat and crypto currencies as it seeks to provide an answer to the question, “will cryptocurrency replace fiat currency”. It also explains the advantages and disadvantages of each.

Oluwadamiloju Akinleye 17 Apr 2023

Congratulations to BTC holders on a new ATH in 10 months. It’s been one hell of a ride. To the moon!

Almost a decade and a half after its mainstream introduction, cryptocurrency has seen considerable popularity, adoption and utility growth. Countries like El Salvador and the Central African Republic have adopted crypto as a legal tender.

Crypto is doing well across the board, and exchanges like Busha are constantly innovating new ways to spend crypto in our daily lives with features like Busha Spend.

It begs the question, “Will cryptocurrency one day replace fiat currency”?

Crypto vs Fiat

Crypto

Cryptocurrency is a digital asset that derives its value from its native blockchain.

It is governed by blockchain protocols, code, and communities.

It relies on distributed and decentralised networks, which eliminates the need for a third party to validate transactions.

Cryptocurrencies have a fixed supply. E.g. Bitcoin has a fixed supply of 21M units making it scarcer than Gold.

Fiat

Fiat money is legal tender whose value is tied to a government-issued currency, like the U.S. dollar.

Central banks dictate the issuance and governance of fiat currency.

The distribution of fiat requires intermediaries, such as banks and other financial institutions.

Fiat money is subject to inflation, and central banks can print more at any time.

Advantages of Crypto Over Fiat

Easy, swift and seamless cross-border payments. Also, with crypto, cross-border transactions have uniform value, unlike fiat.
It guarantees the security and privacy of transactions because of its decentralised nature.
It is easily accessible to anyone with a computer/smartphone and internet connection. Setting up a crypto wallet is more straightforward than opening an account with a traditional bank.
The decentralised nature of crypto makes it free from government interference. It cannot be controlled by any central authority of any country.
Cryptocurrencies, unlike fiat, cannot be falsified because they are powered by blockchain technology. Fraudsters cannot make a fake Bitcoin.

Apples and Oranges

While some experts have predicted the overthrow of fiat currencies by crypto, others maintain that the two are incomparable. This sect asserts that fiat cannot lose to crypto because they are not in any competition with each other as they both serve different purposes.

According to them, fiat currencies are central bank money, while decentralised entities issue cryptocurrencies. Even though they can be used as a means of payment in certain circumstances, they are primarily an investment asset class, and it would be more accurate to call them crypto assets rather than cryptocurrencies.

Will crypto replace fiat?

As of now, it has yet to be ascertained what would happen to global or geographic financial stability if fiat currencies were replaced with cryptocurrency. There is still a lot of research going on. Hence, the diverse opinions and speculations.

A panel of 42 cryptocurrency executives and researchers once predicted that Bitcoin would one day replace fiat currency. About 54% of this panel further predicted that this will happen by 2050 at the latest.

Top financial agencies like the International Monetary Fund (IMF) have also spoken good things about cryptocurrency, recommending its adoption. Although they have raised some concerns about the volatility of crypto in the past, making it currently unadvisable as a main National currency.

Apart from its volatility, tax evasion and financial fraud are other reasons for the Government's resistance to crypto adoption. But crypto can give too many benefits, which fiat fails to offer.

It is clear that both fiat and crypto have their respective advantages and disadvantages, which means they both have their supporters and detractors, depending on what you’re looking for.

Who are you rooting for?

I’d love to know your thoughts on the subject. Will crypto replace fiat? Let me know in the comments.

This article explains the differences between fiat and cryptocurrencies as it seeks to provide an answer to the question, “will cryptocurrency replace fiat currency”. It also explains the advantages and disadvantages of each.