Cryptocurrency and Bitcoin – what lies ahead

Following the collapse of FTX, crypto companies have once again come under great scrutiny. Crypto companies may be complex in nature, and, due to the lack of accounting guidance and limited supervision/governance, may be difficult to monitor.

Some key definitions

Cryptocurrency – A medium of exchange, such as the US dollar, but is digital and uses cryptographic techniques to verify the transfer of funds and control the creation of monetary units. It is considered a digital asset.

Bitcoin – the best-known cryptocurrency, the one for which blockchain technology was created. Bitcoin is a payment method that is entirely digital and requires no physical exchange.

The players

Merchants

Use of cryptos means less transaction costs, faster way of settlement and no provision of personal information, which in a day and age where for the most basic of transactions, a great deal of personal information needs to be provided, is very appealing.

Investors

Although considered risky business, investing in cryptos over the last 2 years has been on the agenda of many, thereby increasing people’s knowledge of cryptos and making them more interested in digital currencies as a whole.

Financial Institutions

The banking sector has had no choice but to evolve. The need for a financial institution as the middleman has somewhat been reduced. With more and more people looking at alternative solutions such as paying in cryptos and using e-banking facilities, banks have started to warm up to the idea of using digital currencies.

Regulators

As already mentioned, there is limited supervision/governance regarding cryptos. Regulators all over the world are trying to evolve and work together to try and regulate consistently these digital assets. Accounting treatments also vary and accounting boards will no doubt be working together to come up with a consistent accounting treatment.

Tech developers

There has been a significant boom in the tech industry with tech experts developing new technologies for managing cryptos, mining cryptos, monitoring cryptos (through e-wallets). These developers are most likely the future of digital assets and are considered the most significant of the players.

The future of cryptocurrency and bitcoin

Although price volatility and risk will remain as the key factors when it comes to investing in these types of assets, as the generations become more tech savvy and find alternative methods to doing traditional banking/investing, use of digital assets will become the ‘norm’. The focus for the future will be how this market will evolve and how the stakeholders will also evolve to provide more guidance/supervision around these assets.

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