Will cryptocurrency be a cornerstone of our financial future? And if so, isn't it time to start understanding it a little better, and perhaps even placing our trust in it?
Daniel Coll, October 13th, 2020
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There is a certain inevitability about the widespread use of digital currencies in the future. Digitisation is happening across all walks of life and in almost every industry, so it’s only logical that finance will go the same way. So, why is it taking so long? Recorded media is almost all exclusively digital now, who even buys CDs and DVDs anymore? But there’s probably some cash in your wallet right now; metal and paper, because on many levels we’re not quite there yet.
Right and wrong. In fact, increasingly wrong. Historically Bitcoin and other early cryptocurrencies became tangled up in the dark web, got themselves a reputation for being used to pay for and sell illegal services, the anonymity they offered was a perfect fit for criminal activity.
Companies wanting to hide their activities and revenue got on board early, using the smoke and mirrors crypto offered to avoid large tax bills and circumvent licensing or operational restrictions. Even today online gambling companies hide their immense profits using Bitcoin and other stable cryptocurrencies, whilst masquerading as advertising or marketing companies in the locations they base their premises.
All this is about to change, and indeed is changing rapidly. As governments get on board with digital currencies and regulations surrounding them, larger companies are looking to get involved because of the security such scrutiny is bringing. The likes of online gambling companies might always be one step ahead of the rules, but many reputable online based products and services - including banking and financial products – are more than happy to toe the line on regulation if it means they can build trust amongst their clients and those with whom they want to do business.
Governments have been notoriously cautious of crypto from the very start. American businessman and author of ‘Rich Dad, Poor Dad’, Robert Kitosaki, famously likened cryptocurrency to Gold and Silver (God’s money, as he puts it) in that they both have more integrity than Government or central bank money. He cites it as one of the main reasons why governments have steered clear for so long given their inability to truly control it:
“Central banks are run by the 'controlling elite'. These elites do not like gold because their banks cannot print gold. Central banks do not like Bitcoin and blockchain because people’s money does not need central banks. Central banks print government money.”
Facebook’s much talked about in-house cryptocurrency, Libra, saw the first significantly sized, ‘reputable’ company showing a true interest in putting their faith in a digital currency. Since then a handful of progressive governments (usually from smaller countries) including Estonia and Lithuania have toyed with the idea of a government-backed digital currency - probably driven by the fear that Facebook’s massive user base of over 2.5 billion would adopt a way of living their financial lives without governmental control.
The challenge for cryptocurrencies going forward is the current incompatibility with Fiat currency that creates an all-or-nothing mentality. The two can sit alongside each other, but as Fiat is controlled by governments and central banks using fractional reserve and other money printing methods around the world, the finite nature of current crypto offerings is a turn-off for those in power, for a range of honourable and not so honourable reasons.
If society agreed that trading in stones or leaves was the norm, we’d all be doing that. Coins and latterly paper were chosen due to longevity and convenience; the certainty of a minted coin and the compact convenience of paper money has served society well until now and continues to do so in many places.
For most of us, our money moves around digitally. We get paid by bank transfer, we spend using debit cards or NFC payment solutions, we send money across our own accounts, and all without ever touching a coin or banknote in months.
Now, you’re probably not going to revolutionise the way we pay for things by suggesting we go back to potatoes or livestock, but in a world moving fast towards being fully digital, adopting a cryptocurrency doesn’t seem that much of a stretch.
For many years cash was king. However, like cryptocurrency, cash can be used for unsavoury practices. Evading taxes, hiding identities, dealing in illegal or illicit products and services without trace are problems associated with cash; coincidentally all things that crypto is often slammed for.
But there is one major difference: cryptocurrency can be monitored and regulated if enough people, organisations and governments start using it. It has the potential to be secure, trackable and fully regulated when used by trustworthy, legally compliant entities. Cryptocurrency is, in fact, no different from cash in the sense that those who wish to use it illegally will find a way, as they can and do right now with cash.
The key to working with crypto is to know who is using it, as the transaction details are plain to see for end users anyway. Actually, what goes on in the middle is of no interest to service providers and consumers. When you get money out of the cash machine, do you care what those notes were used for before? Even if you did, there's no way of finding out.
Knowing your customer is all that's necessary to make using crypto as safe for your business as any other current and acceptable means of payment.
Once you send a new customer through our tool and have a positive ID, you can relax in the knowledge that you can identify who you're dealing with, that they're not involved in money laundering or other criminal activities and that your company is compliant or compliance-ready in advance. a solid KYC policy helps avoid the significant costs and inconvenience of meeting incoming compliance regulations with current clients retrospectively.
Identity verification platforms like Veriff's can eliminate any doubt over who is behind all payments and transactions made from a user’s account, as our fast and efficient service can ensure all your registered users are verified and security checked.