Private cryptocurrencies will become an alternative to fiat money, not a replacement for them

Researchers at one of the world’s largest open electronic repositories, SSRN, have come to the conclusion that private digital currencies will serve as an alternative to fiat money, not a replacement for them.

Tracking the information background in the field of cryptocurrencies over the past few months, it was impossible not to notice that not only private companies and startups, but also government organizations and regulators are turning their attention to the industry.

The main event, of course, can be safely considered the initiative of Facebook – the cryptocurrency Libra. Although US regulators took the idea of the company very negatively, many countries began to develop similar projects in order to protect themselves from financial collapse, as well as to reduce dependence on the US dollar.

SSRN experts decided to conduct a study of this area and study a new class of digital currencies, as well as their impact on modern society. In particular, the study examined “the difference between benefits for citizens in the conditions of permissive and restrictive regulatory regimes.”

As a result, experts found that private digital currencies contribute to improving the welfare of citizens. They made such a conclusion with respect to countries in which “local investment negatively correlates with the profitability of private digital currency.”

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Researchers consider one of the main arguments of this statement to be a lower correlation, which promotes diversification and increases the welfare of citizens. One of the experts who conducted the study, David Ermak, also added that the key factor that determines the dominant currency is “confidence”.

In his opinion, it is likely that cryptocurrencies of social networks can be integrated into retail platforms on smartphones. Thanks to this, they will be quite convenient and easy to use.

In addition, social networks already have a huge customer base, which has billions of users – more than residents in any country in the world.

As an example, he remembered AliPay and WeChatPay, who were able to quickly select the title of “guarantor of payments” from the People’s Bank of China.

In the end
research experts note that private digital currencies are not
competitors of traditional money and should not claim to replace them, they are an alternative.

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