Despite their still modest history, cryptocurrencies are having an unprecedented impact on the global financial systеm. Despite the continued dominance of traditional banks, the impact of cryptocurrencies on the global economy is growing every year. In just 16 years of existence, decentralized digital assets have reached such a level of sophistication that major countries, intergovernmental organizations, and corporations are now including them in their reserves.
Let’s take a look at why digital currencies are becoming more important in the global economy, what factors are ensuring such a rapid integration of cryptocurrencies into the financial systеm, and what prospects for cryptocurrencies as a new form of money we can observe in the near future.
A bit of history
The idea of creating an anonymous digital currency, more efficient and secure than traditional money, was in the air much earlier than October 2008, when Satoshi Nakamoto published the white paper of the first cryptocurrency. In his landmark document, the Bitcoin creator mentioned the developments of Wei Dai and Nick Szabo, who were one step away from realizing the concept of decentralized money long before him. Ten years earlier, in 1998, Wei Dai had submitted a publication on a project to create “B-money” and Nick Sabo on Bit Gold. Both papers, written independently, described the concept of creating a decentralized currency that would solve the efficiency problems of traditional money related to trust, increased costs of maintaining the governing bodies (banking systеm), and lack of protection of users’ personal information. Both projects required revisions and were not realized, but most likely served as an additional source of inspiration for the creator of the first cryptocurrency.
Just over two months later, on January 3, 2009, Satoshi Nakamoto mined the Genesis block of bitcoin, launching the network. The first purchase paid for with bitcoin was made by Laszlo Heinitz, a programmer from Florida, on May 22, 2010. At that time, he bought two delivery pizzas for 10,000 BTC, which cost about $40 at the time. It is clear that the crypto community’s sympathy for the developer who spent so many coins on food grows every year on this day following the growth of bitcoin (May 22 is celebrated as Bitcoin Pizza Day). However, then he was proud of the fact that he was able to make the first successful purchase of goods for cryptocurrency in the history of mankind. By the way, at the current exchange rate, this purchase would have cost him almost $1 billion.
In 2010, there was a confident realization that the game with bitcoin is worth the candle. In the spring, the first BTC trading platform bitcoinmarket.com appeared, and in the summer — the infamous MT.Gox exchange, which was robbed. But that will happen in a few years, and in the meantime, the first cryptocurrency slowly grew in value, reaching parity with the dollar in February 2011.
In 2011, the cryptocurrencies Namecoin and Litecoin saw the light of day, giving birth to the altcoin market. By 2013, there were more than ten altcoins (including Ripple (XRP)).
2015 was marked by the creation of the Ethereum network, the second most capitalized cryptocurrency in the world. It was this blockchain that ushered in the era of smart contracts, which eventually led to the creation of the DeFi sector.
Furthermore, in the years that followed, the market continued its quantitative and qualitative development, experiencing ups and downs while maintaining a long-term positive trend.
Today, at the end of 2024, there are already more than 10,000 cryptocurrencies represented on the CoinMarketCap platform (CoinGecko at the same time records more than 16,000) with a total capitalization of about $3.4 trillion. Bitcoin, with a capitalization of $1.9 trillion, continues to hold a dominant position with a share of 54-55%.
The impact of blockchain on global markets continues to grow at a tremendous rate, taking on new forms and being realized in a wide range of human activities. The principles of decentralization, security and high performance are finding their way into the global financial systеm, solving its inherent problems in the most innovative ways.
Financial inclusion
Traditional systems cannot provide financial services to the entire global population: billions of people, especially in developing countries in Africa and Southeast Asia, have limited access to financial services. Cryptocurrencies provide access to financial markets in areas where full banking services are unavailable or too expensive. Transactions with digital assets require only a smartphone and an internet connection, while global banks require branch visits, identity documents, and many other procedural requirements. The financial inclusiveness of cryptocurrencies is one of the levers to stimulate the economies of countries that need it, opening up opportunities to save value, earn money, make transfers, obtain credit, and purchase products and services previously unavailable to their citizens.
Cross-Border Transactions and International Trade
Digital assets offer tremendous opportunities for cross-border financial transactions for both individuals and businesses. They have opened a Pandora’s box for traditional financial mechanisms with their ability to conduct instantaneous, barrier-free transactions with minimal fees. The use of cryptocurrencies in international trade has become a huge incentive for traditional international payment systems: they need to move much faster to be competitive.
Reducing the costs for the millions of migrants who send remittances home, generating impressive cross-border financial flows, has a particular impact on developing countries. According to the World Bank, even the smallest reduction in the transaction costs of international remittances translates into billions of dollars in annual revenue for their economies. Thus, by providing an alternative to traditional monetary channels, digital currencies have a clear positive impact on the economic growth of developing countries.
Impact of Cryptocurrencies on the Banking systеm
The main impact of digital currencies on financial institutions is that their rapid development requires banks to accelerate modernization and innovation to increase competitiveness in the current environment. In addition to measures to optimize business processes to reduce costs and improve service quality, the traditional banking systеm is trying to maintain control by issuing its own digital assets that can compete with the existing market of decentralized assets. In recent years, central bank digital currencies (CBDCs) have been actively developed around the world, ideally offering all the benefits of blockchain technology while remaining under full government control and management.
Cryptocurrencies and Financial Stability
As a source of store of value, cryptocurrencies have a positive impact on inflation. This effect is particularly evident in countries with financial instability or hyperinflation. In such circumstances, stablecoins and other digital assets act as a safe alternative to national currencies that are in some form of turmoil. Thus, cryptocurrencies act as a balancer for national monetary policies in times of their weakening. This trend is clearly visible in countries with developing economies, pronounced income inequality and other problems in monetary policy.
Another role that bitcoin is increasingly playing in international finance today is its use as a safe haven asset for public institutions and large corporations around the world. Institutional investors, giant corporations and even governments everywhere are making decisions to inсlude the first cryptocurrency in their reserves to hedge risks in an unstable global economic environment.
Cryptocurrencies and investing on a global scale
Investment trends are now facing cryptocurrencies: there is growing confidence and acceptance from both large institutional players and retail investors. Cryptocurrency exchange-traded funds (ETFs) and their derivatives are attracting a large number of new investors as a safe way to diversify portfolios and generate additional returns.
Regulatory Landscape
The risks and opportunities of cryptocurrencies for the global economy and geopolitics have raised serious questions for the global regulatory landscape. Both the positive and negative impacts of the burgeoning digital asset industry require the creation of common rules aimed at investor protection and sustainable development, while offsetting the negative impacts associated with criminal activity and the use of shady schemes. Currently, the regulation of cryptocurrencies at the global level has not been developed, which poses certain threats in the unstable situation in the world. Circumvention of sanctions by terrorist countries, cybercrime, international money laundering schemes, protection of investors’ and traders’ rights — all these issues are on the agenda of lawmakers around the world.
The future of cryptocurrencies in the global economy
Traditional finance continues to dominate the global economy. Cryptocurrencies are not replacing traditional money, but creating a more versatile and sustainable global financial environment. Blockchain technologies, being in the process of constant development, contribute to the qualitative development of traditional systems. Innovative solutions such as smart contracts, decentralized finance tools (DeFi), tokenization of real-world assets and others complement and optimize classic market mechanisms, increasing their efficiency.
The integration of privacy, transparency and security principles underlying decentralized technologies entails increased user trust, while accelerating and lowering the cost of traditional financial services.
Diversifying investment portfolios through cryptocurrencies is becoming a popular strategy to increase wealth and reduce risk for individuals, companies and governments.
Although the first cryptocurrency was criticized for its high energy consumption and environmental pollution (as it turned out to be unfounded), today we can clearly see that the blockchain industry offers the most energy-efficient sustainable solutions compared to traditional systems.
Today we can say that cryptocurrencies have provided economists, financiers and politicians with a huge experimental base for analyzing global processes and finding solutions to existing problems. The traditional financial ecosystem no longer considers cryptocurrencies as a threat and is successfully undergoing a qualitative transformation, integrating new tools. The global economy has already accepted and will continue to accept cryptocurrencies as a benchmark for improving the efficiency of established market processes and improving the financial landscape.
Thank you for your attention to our article. Invest safely and profitably!
AnyExchange is a cryptocurrency exchanger that has been successfully operating on the international financial market for more than five years. On our platform you can convert popular digital assets into electronic or cash money at the optimal exchange rate. The site also offers fast and anonymous money transfers worldwide.
