Cryptocurrency, a digital form of money utilizing blockchain technology, is gaining ground as a payment method in Europe. Its appeal lies in several advantages for both consumers and merchants:
Lower Fees and Faster Transactions
Cryptocurrency transactions sidestep intermediaries like banks, reducing costs for users, especially across borders. The decentralized nature of blockchain enables swift transactions, eliminating the delays inherent in traditional methods.
Cryptocurrencies are based on peer-to-peer networks, where users can send and receive payments directly without the need for a middleman. This means that no intermediaries charge fees for processing transactions, such as banks, payment processors, or remittance services. Cryptocurrency transactions are also cheaper than traditional methods when it comes to cross-border payments, as they do not involve currency conversions or exchange rates. For example, according to Blockchain.com, the average fee for a Bitcoin transaction in November 2023 was $20, while the average fee for a bank wire transfer was $35.
Cryptocurrencies also offer faster transactions than traditional methods. They take from a few seconds to a few minutes, depending on the cryptocurrency and the network congestion. In contrast, traditional methods can take from a few hours to a few days, depending on the intermediary and the destination. For example, the average confirmation time for a Bitcoin transaction in December 2023 was 10 minutes, while the average confirmation time for a bank transfer was 3 days.
Enhanced Privacy and Control
Cryptocurrency transactions don’t demand the divulgence of personal information, shielding users from identity theft. Users also enjoy full control over their funds, stored securely in digital wallets, free from reliance on third parties.
Cryptocurrencies are based on cryptography, a techniques that ensure the validity and integrity of transactions, without requiring users to reveal their identities or other sensitive data. This protects users from identity theft, which is a common risk in traditional payment systems, where hackers can access personal information such as names, addresses, credit card numbers or bank account details. Cryptocurrency transactions are also pseudonymous, meaning that users can create multiple addresses or accounts that are not linked to their real identities or traceable to their online activities.
Users also have full control over their funds, as they can store them in digital wallets that only they can access with their private keys. A private key is a secret code that allows users to sign and authorize transactions, while a public key is a code that others can use to verify transactions and send funds to the user. Users can choose from various types of wallets, such as hardware, software, paper, or web-based, depending on their preferences and security needs.
However, the journey of cryptocurrency in Europe is not without hurdles:
Legal Ambiguity and Technical Hurdles
Cryptocurrency faces legal uncertainties across European countries, resulting in confusion for users and merchants. Technical complexities pose challenges, requiring users to navigate issues such as wallet security, transaction monitoring, and network-related problems.
Cryptocurrencies are subject to different legal frameworks and interpretations across the European Union, depending on the country and the type of activity involved. Some countries, such have adopted specific regulations for crypto-assets, while others have not. This creates legal ambiguity and inconsistency for users and merchants who want to use or accept cryptocurrencies as a means of payment or investment. Moreover, the lack of harmonized regulations at the EU level can create barriers to cross-border transactions and innovation in the crypto space.
Cryptocurrencies also involve technical complexities that can pose challenges for users, especially those who are not familiar with the underlying technologies and mechanisms. Users need to secure their digital wallets, which store the private keys that allow them to access and spend their funds. If users lose their private keys, forget their passwords, or fall victim to hacking or phishing attacks, they can lose their funds permanently, with no recourse or recovery options. Users also need to monitor their transactions, which can be affected by network congestion, fee fluctuations, or malicious actors. Users may experience delays, errors, or losses in their transactions, depending on the network conditions and the security measures they take.
Limited Merchant Acceptance
According to Triple-A, more than 420 million users own and use cryptocurrencies across the world. Despite its advantages, cryptocurrency struggles for wider acceptance among merchants due to a lack of infrastructure and support. The reluctance is rooted in issues like incompatible point-of-sale devices, inadequate internet connectivity, and difficulties in converting cryptocurrency to fiat currency.
Signs of Progress: Cryptocurrency’s Potential Future
While challenges persist, indicators suggest a promising future for cryptocurrency in Europe:
Innovations Shaping Cryptocurrency
Ongoing innovations in cryptocurrency promise positive impacts:
- Layer 2 Solutions: Protocols like Lightning Network and Raiden Network aim to enhance scalability and efficiency by moving transactions off-chain.
Layer 2 Solutions: These are methods that allow faster and cheaper transactions by moving them off the main blockchain.
- Stablecoins: Tether and USD Coin, pegged to stable assets, address volatility concerns, making cryptocurrency more reliable.
Stablecoins: These are types of cryptocurrency that are backed by stable assets, such as the US dollar or gold, to reduce price fluctuations. Stablecoins can make cryptocurrency more reliable and trustworthy.
- Central Bank Digital Currencies (CBDCs): These are digital versions of national currencies that are issued and regulated by central banks, such as the European Central Bank or the Swedish Riksbank. CBDCs can make payments more efficient, secure, and inclusive. Examples of CBDCs are Digital Euro and e-Krona.
Education and Awareness Initiatives
Cryptocurrency’s accessibility and understanding are growing through various channels:
- Media and Social Media: Platforms like CoinDesk and Twitter contribute to cryptocurrency exposure, fostering awareness among a diverse audience.
- Courses and Programs: Educational platforms like Coursera and Udemy provide courses on cryptocurrency, empowering individuals with the knowledge to navigate the crypto landscape.
Blockchain Intelligence Group helps investigators to confidently approach cryptocurrency cases using the Certified Cryptocurrency Investigator (CCI) training program. Through various modules designed by expert U.S. investigators, Blockchain Intelligence Group is arming professionals with the necessary knowledge to close cases swiftly and protect customer assets. Get certified at cryptoinvestigatortraining.com.
- Events and Communities: Engaging events like Crypto Valley and Web Summit connect enthusiasts, fostering a culture around cryptocurrency.
Lance Morginn, CEO and president of Blockchain Intelligence Group, emphasizes the growing importance of understanding cryptocurrency and fighting illicit activities tainting its image: “It’s not just about transactions; it’s about building a community that propels the future of finance.”
Forces Influencing Cryptocurrency
Various factors impact cryptocurrency’s performance, such as supply and demand, competition and innovation, and regulation and adoption. These forces can affect the price, popularity, and potential of different cryptocurrencies in the market.
Supply and Demand
Cryptocurrency’s value is influenced by market dynamics, with supply and demand playing a crucial role. Supply refers to the amount of coins available in circulation, which is determined by the protocol of each cryptocurrency. One of the main features of Bitcoin is that it has a limited supply of 21 million coins. This means that there will never be more than 21 million bitcoins in existence, which makes it a scarce and valuable asset. No one can change this rule without the consensus of the majority of the network.
Competition and Innovation
The crypto landscape is shaped by continuous innovation and competition, Innovations emerge—new tech, features, solutions—raising the bar for functionality, efficiency, and security. Simultaneously, different players, be they cryptocurrencies, platforms, or services, compete, all eyeing a piece of the market, a share of users, and that elusive network effect. It’s this opportunity for innovation and competition that propels the adoption and growth of cryptocurrencies, but not without risks of potential fragmentation and volatility.
On the future of cryptocurrency in Europe, challenges persist alongside promising indicators. Lower fees and faster transactions, coupled with enhanced privacy and control, mark the appeal of cryptocurrencies. However, legal ambiguity and existing risks of money laundering and fraud continue to impede its mass adoption.
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Written By: Omar Marzouk
Writer, Content marketing at Blockchain Intelligence Group
