Positives and negatives of cryptocurrency

Cryptocurrency is a decentralized digital currency transferred directly between users and a public ledger confirms all transactions. The digital payment system used for the transaction employ cryptographic algorithm and functions to ensure anonymity of the users, security of the transactions, and integrity of the payment systems. Instead of trust, the principle of the authenticity of transactions is cryptographic proof. Though seen as a disruption for traditional banking and financial institutions, it has gained significant traction over the last decade. Bitcoin, created in 2009, was the first decentralized cryptocurrency. Since then, several companies have created numerous cryptocurrencies. At present, 969 cryptocurrencies exist across the globe, with a total market capitalization of 116 billion USD. While still not understood by most people, the governments and banks have become aware of its pros and cons.

Positives and negatives of cryptocurrency

Positives of cryptocurrency:

Cryptocurrencies are gaining popularity because of following reasons.


The transaction cost is low, approximately 1% of the transaction amount. In addition, cryptocurrency eliminates the third-party clearinghouses, thus, cut down the cost and time delay. All the transaction over cryptocurrency platforms, whether domestic or international, are equal. Also, they constitute single valuation across the globe.

An alternative to fiat currency

Governments have strict regulation over the banking systems, monetary and fiscal policies, national currencies, and international money transfers. In contrast to this, cryptocurrencies offer the users a reliable means of money exchange outside the direct control of national or private banking systems.

Privacy and account protection

Governments have the authority to seize a bank account following a fraud or a suspicious activity. But it isn’t possible while using cryptocurrency transaction system, as it conceals the identity, information, and details of the parties to the transaction. Thus, cryptocurrency provides immunity to a citizen against freezing or seizing a bank account.

Low restrictions

To open an account for international usage, a bank validates the address, income, and identification of a person. Also, different banks can have different criteria for providing same facilities. But cryptocurrency users don’t require any disclosure or proof of income, address, or an identity. In addition, one can join it for free. This way, cryptocurrency lowers numerous barriers, that a person encounters in a traditional banking system.

Accessible and secure

An individual can send and receive a cryptocurrency from any part of the world irrespective of traditional barriers such as national borders and banking regulations. In addition, no individual can manipulate it because it is cryptographically secure and doesn’t contain users’ personal information.

Negatives of cryptocurrency:

Consequences of cryptocurrency usage have arisen the tension among various governments and regulators.

Web crimes

The companies, which backs cryptocurrency encounters a common problem of hacking. Recently, one such company, Tether, lost bitcoins worth millions of US dollars. These instances show that cryptocurrency lacks security factors compared to fiat money.

Online black market

Drug trade of dark markets, nowadays, uses cryptocurrency for illegal supplies. The United States consider bitcoins as virtual assets. In such countries, the law enforcement agencies find it difficult to put a stop to the online drug trade or utilization of bitcoins earned from these trades. Improper regulation of cryptocurrency enhances online illegal trade.

Economy instability

Cryptocurrencies exchange takes place over the Internet and hence, is outside the government financial institutions. Due to this, they have the unique potential of challenging the existing system of currency and payments.


Economies across the world have been using fiat currency for ages. Today, every nation knows about the causes of slowdown, recession, stagnation, stagflation, and growth. Because, in past, one or more nation has experienced it and they can predict the capability of an economy according to the current situation. But, cryptocurrencies are still wrangling at the experimental stage. Such inexperience induces difficulty for the government to make provisions for cryptocurrency regulation.

Low usage

The lack of awareness among common people has resulted in the limited number of transactions using cryptocurrency. Owing to its unpredictable valuation, a small number of businesses use them. At the same time, where people easily adapt the physical form of money, the acceptance of cryptocurrency among masses is a major problem.

Many western countries treat cryptocurrency as property and impose capital gains tax on it.  In addition, governments should encourage the development of supervision ecosystem that assists in tracking illegal activities. To banish the limitations of cryptocurrency, one realistic approach is using it along with fiat money. The fiat currency can make use in paying for basic goods and services, where cryptocurrency can find the use for business purposes. And the further success of the cryptocurrencies depends upon the devised regulatory frameworks.

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