Social trading and multi-asset brokerage company eToro and Imperial College London have published on July 9, 2018, a research paper stating that cryptocurrencies might become a mainstream payment method within the next decade.
The authors of the report entitled Cryptocurrencies: Overcoming Barriers to Trust and Adoption are Professor William Knottenbelt from Imperial College London and Dr. Zeynep Gurguc from Imperial College Business School, while eToro commissioned the research.
“There’s a lot of skepticism over cryptocurrencies and how they could ever become a day-to-day payment system used by the man on the street. In this research, we show that cryptocurrencies have already made significant headway towards fulfilling the criteria for becoming a widely accepted method of payment,” Professor Knottenbelt explains.
According to the paper, there are three main criteria that cryptocurrencies must fulfill to become mainstream alongside traditional fiat money.
- The first criterium is acting as a store of value. It means that it should allow individuals to make choices on when to spend their purchasing power.
- The second is that they must act as a medium of exchange – facilitate the exchange of goods and services by eliminating the inefficiencies associated with a barter economy.
- The last but not least important is the criteria of a unit of account, which means the currency acts as a measure of value in the economic system.
At the moment, cryptocurrencies fit the first criterium – a store of value. In order to meet the other two, they will have to address issues such as scalability, usability, and regulation, as well as volatility, incentives, and privacy, which currently hinder the further development of crypto asset industry.
The paper compares the cryptocurrencies’ path into the mainstream with the monetary system developments in the past. Namely, people first exchanged goods and services among each other, which led to early forms of payment with things like cowrie shells. Humans later replaced this system with coins, paper notes, and plastic cards, only to recently include contactless and mobile payments. The only logical step forward, the authors argue, is the cryptocurrencies coming to the stage.
“People have grown used to their view of money as a solid, permanently fixed idea when in fact the opposite is true. The history of money is a history of evolution, of new technology replacing old to improve the transfer of value from one person to another. Cryptocurrencies represent the next step on this journey,” believes Iqbal V. Gandhan, UK Managing Director of eToro.
The talk of crypto assets entering the mainstream is hardly anything new. At a finance symposium in April 2018, Joseph Otting, the Comptroller of the Currency at the U.S. Department of the Treasury, said cryptocurrencies have the potential to go mainstream.
Moreover, in December 2017, two major exchanges, the CME Group and the CBOE Global Markets, launched bitcoin futures trading operations.
In May 2018, Goldman Sachs, one of the largest Wall Street banks, announced it’s analyzing the possibilities of direct trading of bitcoin.
Around the same time, it became public that the New York Stock Exchange, part of the Intercontinental Exchange, is working on an online trading platform that would allow large investors to buy and hold bitcoin.
A Thomson Reuters survey revealed in April 2018 that one in five financial institutions are considering cryptocurrency trading in 2018, with the majority of those who are considering trading saying they plan to introduce crypto trading over the next three to six months.