Regulation
What to expect in a mainstream crypto economy
In 2009, an anonymous person released the genetic building block of Blockchain and launched Bitcoin, a pioneering decentralized currency. From its near-zero value in 2009, Bitcoin’s value has risen to a staggering $73,500, while the total valuation of the cryptocurrency economy stands at $1.3 trillion.
Initially considered a niche digital currency reserved for computer geeks, today cryptocurrencies and decentralized finance (DeFi) have emerged as a strong alternative to traditional financial systems around the world.
Today, governments are actively investing in cryptocurrencies and blockchain technology. Multi-billion dollar trading companies have emerged and there are millions of investors and cryptocurrency enthusiasts fixated on the phenomenon which seems to become more and more popular every day.
Cryptocurrencies’ journey from an obscure peer-to-peer transfer system to mainstream acceptance has been fueled by the evolution of blockchain technology and changing security measures to ensure safe transactions.
In this article, we will discuss whether cryptocurrencies will become mainstream and penetrate families of all age groups and what are the reasons behind its exponential growth and adoption.
How did cryptocurrencies gain mainstream acceptance?
Every day, cryptocurrencies are gaining more widespread acceptance. Its relevance is no longer limited to cryptocurrency-related platforms, as we have recently seen tech and finance giants such as Microsoft and PayPal use cryptocurrencies in their services. This penetration by the cryptocurrency industry has given them access to a much larger customer base to trade and invest in cryptocurrencies.
The online gambling industry is also one of the pioneers in cryptocurrency adoption, with the first casinos accepting Bitcoin in 2012. Cryptocurrency adoption has since enabled the growth of the crypto gambling industry billion-dollar business, including sports betting and Bitcoin casino with instant withdrawal.
Several countries including the United States, the United Kingdom, and European Union countries have regulated the use of cryptocurrencies. Countries like El Salvador have made Bitcoin legal tender, while the Bahamas, India and Japan have launched their own central bank digital currencies (CBDCs). Additionally, 130 countries are exploring the development and launch of their own CBDCs to compete with cryptocurrencies.
Furthermore, the use of blockchain technology is expanding beyond decentralized finance (DeFi) services, providing solutions in medical, agricultural, logistics, management and other sectors. Despite concerns about market volatility and regulatory concerns, cryptocurrencies are becoming increasingly mainstream as countries are now actively enacting new laws to regulate the industry.
What factors contributed to cryptocurrencies becoming mainstream?
Large-scale investments
In the venture capital sector, cryptocurrency has proven to be one of the fastest growing markets. During March and April 2024, the Crypto venture capital funding they reached $1.09 billion and $1.02 billion respectively.
Just in 2024, the cryptocurrency market has witnessed several breakthrough investments, including $1.7 billion to blockchain infrastructure companies, followed closely by decentralized financial protocols of $626 million, another $225 million in funding to “Monad” and a $47 million investment in “Securitize.”
Institutional interest
Several large financial institutions such as banks and publicly traded companies are investing in and offering crypto products, lending credibility to the asset class. Institutional enthusiasm has attracted more investors and legitimized cryptocurrencies.
Growing use cases
Cryptocurrencies are used for various purposes beyond simple peer-to-peer transactions. Their use cases have expanded to areas such as online shopping, online gambling, cross-border payments, decentralized finance and as a safeguard against inflation. This diversification has contributed to their increased adoption.
Technological advances
Technological progress, such as advances in scalability and user-friendly interfaces, has improved the accessibility and efficiency of cryptocurrencies. This played a role in increasing their public acceptance.
For example, platforms like Skrill have contributed significantly to the advancement of cryptocurrencies. Skrill offers cryptocurrency trading and wallet services with popular e-commerce platforms, and the widespread use of cryptocurrencies in crypto casinos has helped bridge the gap between traditional finance and cryptocurrencies.
Help for the Underbanked
Cryptocurrencies have the potential to provide financial services to individuals around the world who do not have access to traditional banks. For example, crypto wallets and mobile payment solutions in areas with limited access to banking infrastructure have contributed to their adoption, as they provide greater financial inclusion.
Market adoption and integration
The growing acceptance of cryptocurrencies by both businesses and consumers, along with their integration into financial systems, can stimulate demand and reduce market volatility, ultimately driving broader adoption.
According to a report by Security.org, consumer adoption of cryptocurrencies has increased since From 30% in 2023 to 40% in 2024. This wave of adoption and integration improves liquidity levels, further driving mainstream acceptance of cryptocurrencies.
What are the challenges preventing the mainstream adoption of cryptocurrencies?
Several key factors currently prevent the full mainstream adoption of cryptocurrencies:
Regulatory uncertainty
The regulatory environment and legal framework of cryptocurrencies can vary significantly from country to country. While some jurisdictions have clear rules in place, others are more cautious, even restrictive. This lack of uniform global regulation serves as a barrier to the mainstream adoption of cryptocurrencies across the world.
Price volatility
The price volatility of cryptocurrencies may prevent their use as a medium of exchange or store value. Cryptocurrency prices fluctuate significantly over short periods, making them a high-risk, speculative investment.
Scalability issues
Popular cryptocurrencies like Ethereum and Bitcoin face scalability issues, leading to slower transaction speeds and higher fees during high usage periods. The transaction speeds of Litecoin and Dogecoin are much faster. While scalability issues may prevent mainstream adoption of the most popular cryptocurrencies, there are scalability solutions such as layer 2 solutions and proof-of-stake consensus mechanisms that could change the scalability issues.
Limited understanding and education
For widespread adoption to be successful, cryptocurrencies must become easier to use and more accessible to people who are not tech-savvy. Lack of education about the risks and benefits of cryptocurrencies among the general public prevents active involvement and adoption.
Resistance of traditional finance: Traditional financial institutions see cryptocurrencies as a disruptive threat to their established, traditional business models. For example, in 2018, US banks JPMorgan, CitiGroup and Chase limited or banned cryptocurrency purchases using their banking services or credit cards. This was seen as an attempt to limit the exposure of traditional financial institutions to the risks associated with cryptocurrencies.
What is the future of the mainstream cryptocurrency market?
If cryptocurrencies were fully widespread on a global scale, the future of finance, the economy and society would be significantly different. There are several radical changes that can be expected if cryptocurrencies become mainstream.
Transformation of financial systems
Traditional fiat currencies could be replaced with central bank-issued cryptocurrencies (CBDCs) or private cryptocurrencies such as Bitcoin and Ethereum. The importance and role of traditional banking systems and financial institutions could potentially decline as decentralized finance (DeFi) platforms built on blockchain technology enable peer-to-peer transactions, loans and other financial services without intermediaries.
Furthermore, cross-border transactions and remittances could be instantaneous, compared to traditional systems, more convenient and exceptionally convenient, leading to better financial inclusion for unbanked populations around the world.
Technological advances
Current blockchain networks are facing scalability challenges that can be resolved by implementing technological advances such as sharding, new consensus mechanisms, or incorporating layer 2 solutions.
Additionally, quantum computing could impact the security and sustainability of existing cryptocurrencies. Quantum computing uses complex calculations much faster than traditional computing models that could break encryption. The reality of this threat requires cryptocurrencies to constantly adapt and evolve.
Social changes
Increasing financial privacy and anonymity can empower individuals; however, it also raises concerns about illicit activities and the need for trust and regulatory oversight. The concept of trust could shift from centralized authorities to decentralized and transparent blockchain networks, potentially impacting governance models and social structures.
The widespread adoption of cryptocurrencies could pose a threat to the authority and control of traditional financial institutions and governments over financial systems.
Economic impact
As cryptocurrencies become more widely accepted and have greater liquidity, price fluctuations and volatility may decrease, making them stores of value and more stable means of exchange.
The integration of blockchain technology, smart contracts and decentralized apps could lead to the development of new economic models and business prospects, ultimately promoting growth and innovation.
This would require governments to adapt fiscal policies and regulations to take into account the decentralized nature of cryptocurrencies and their potential impact or influence on monetary policies.
Final thoughts
While achieving mainstream adoption of cryptocurrencies is possible and would bring significant benefits, it will also present challenges. As cryptocurrencies continue to evolve, their role in the global financial system is likely to become increasingly important.
This would also require regulators to provide clear and comprehensive guidelines on how cryptocurrencies should be classified and regulated. This would include clarifying whether cryptocurrencies are securities, commodities, currencies or assets for tax purposes.
Once the global regulatory and legal framework is established, the mainstream adoption of cryptocurrencies could be a positive development globally.