The World Economic Forum (WEF) says there are four main factors sparking a tidal wave of crypto adoption across the world.
In a new report, the independent international organization says that interest in cryptocurrencies is growing due to a combination of economic drivers.
“Central bank policies, hyperinflation, and macroeconomic instability have driven volatility and devaluation of local fiat currencies relative to other global currencies before and particularly during the COVID-19 pandemic. This has caused individuals and corporations such as Microstrategy, Tesla and Square to hold bitcoin and other digital monies. It has also inspired increased advocacy by users and awareness among policymakers from the US to El Salvador who are crafting new policies around cryptocurrencies.”
The WEF also notes that remittance costs are eating up a larger-than-ideal percentage of transactions, potentially explaining the growing attention toward P2P (peer-to-peer) systems found in many cryptos.
Another factor driving interest in crypto assets is the creation and rapid scaling of stablecoins as a much more efficient medium of exchange.
“The market cap of USD Coin (USDC), for instance, has passed $25 billion with a compound annual growth rate of more than 6,100%. Such traction has even inspired Sweden to pivot its planned e-krona in order to compete with such cryptocurrencies and central bank digital currencies (CBDCs).”
Finally, the WEF highlights the wide array of different applications that various digital assets are providing, plus an effort to become greener and consume less energy are causing people to turn their heads toward the crypto markets.
“Such improvements are also propelling DeFi (decentralized finance) application usage. The rapid proliferation and maturation of these innovations is in large part due to the open-source architecture and global developer communities that undergird crypto networks.”
The WEF also says that cryptocurrencies do not enable illicit financial activity while offering a chance to create a more transparent economic system.
“Regulators have highlighted the pseudonymous and borderless nature of cryptocurrency systems as potential money laundering and terrorist financing risks. Yet, illicit activity is significantly less than in the traditional financial system, comprising just 0.34% of all cryptocurrency transactions.
Cryptocurrencies can enable transparency and provide an opportunity for regulators actively seeking to shift more transactions from the informal to the formal economy.”
You can read World Economic Forum’s full report by Alpen Sheth here.