Will cryptocurrencies soon become a mainstream form of payment?

A New York school now accepts bitcoin – will cryptocurrencies soon become a mainstream form of payment?

Balajee Sethuraman, Cognizant’s Europe head of banking and financial services, says YES.

Cryptocurrencies and distributed ledger technologies have made significant progress over the last 12 months as more and more banks and governments have seriously evaluated their impact. It is only a matter of time before they become mainstream. The real catalyst will be the implementation of regulatory frameworks around such forms of digital currencies.

Concerns surrounding these technologies have focused on their potential to undermine traditional monetary policy, support illegal activity, and possibly fall short of real-world privacy requirements. The significant levels of volatility of these currencies also have to be addressed. However, we are already beginning to see several governments taking the lead towards this. For example, Japan and Norway are attempting to integrate digital currencies into their financial sectors. Several African countries such as Senegal, Kenya and South Africa are placing their currencies onto the distributed ledger technology or are introducing their own digital currencies.

Over the next few years, we anticipate the more widespread adoption of cryptocurrencies.

Garrick Hileman, research fellow at the Cambridge Centre for Alternative Finance, says NO.

While the value of cryptocurrencies such as bitcoin have recently skyrocketed, for a number of reasons they are unlikely to be used by the majority of people for payments in the next couple years.

First, relatively few people receive their income in cryptocurrency, forcing the extra step of first acquiring it before it can be spent. They also suffer from a chicken-and-egg problem: relatively few merchants accept cryptocurrencies because not many people use them for payments, but people may only start using cryptocurrencies more for payments if more merchants begin to accept them. Transactions can be relatively slow, often taking minutes or hours before they are securely processed. The fees for using some cryptocurrencies have also ballooned – it now can cost more than £3 in fees to send even a trivial amount of bitcoin (less than £0.01).

Cryptocurrency payments have great potential, particularly around machine-to-machine transactions, but mainstream use in the short-run is unlikely.

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