Six or seven years ago, only the most tech-savvy people dealt with cryptocurrency. Then, Bitcoin exploded in 2017, and for a brief moment, everyone and their grandmothers started thinking about buying crypto. This giant wave of interest sent ripples across the world of the global economy, some of these effects we see even today. With that in mind, what impact may cryptocurrency have on the global economy? Let’s find out!

1.   Micropayments

The biggest problem with micropayments was that transaction fees were sometimes higher than the original payment cost. Even if the combined cost is not a problem, it always seemed somehow counterintuitive (not right).

With the help of cryptocurrencies, small-value transactions are no longer a problem. Because more and more businesses are adopting crypto payments, you even have hot dog stands where you can pay with your crypto wallet.

This seems like a small trend (some might even call it a gimmick), but the truth is that it changes everything. Once global micropayments become an everyday occurrence, the world of the economy (and e-commerce) may change forever.

2. Decentralized Finance (DeFi)

What some people look forward to the most in the rise of crypto is the birth of the so-called decentralized finance. While the bank system has existed in one form or another since the dawn of civilization, many people are dissatisfied with its current state. They also believe that, while it was fine in the past, we can use something better with today’s level of technological development.

With DeFi, people will be able to get loans or invest without ever going through the intermediary. They’ll also enjoy a permissionless, open, and transparent system in which no party would hold enough power to manipulate the system for their benefit. Blockchain technology especially guarantees the latter. Whether you're looking for a DeFi development company to help with your financial operations, or you're simply looking for a smarter way to invest, DeFi is the way forward.

Education on the matter is still in its early days and many people are already calling for regulatory measures. People tapping into this world should learn more about Barry Silbert and how he built his wealth on Bitcoin’s potential. The potential of a decentralized financial system is countless, and the changes it can bring to the global economy are truly remarkable.

3. Crypto and taxes

Many remote workers are in online teams with people from around the globe. Since crypto provides immediate and low-fee transfers, there are a lot of people who prefer to get paid this way. This creates a significant problem because of difficult international crypto tax compliance.

Crypto is unregulated in most parts of the world, and it’s yet to enter the tax system of most countries. At the same time, you can’t avoid the tax system by exploiting crypto. The excuse that it’s still not regulated will not get you out of legal trouble. You know what they say about death and taxes.

Therefore, if you’re working with an international team online, paying them in fiat or figuring out how to legally handle crypto payments and tax compliances is better.

4. Simpler cross-border transactions

With the previous section in mind, sending money across borders is much simpler with crypto. According to one statistic, Global remittances in 2022 reached $626 billion. While the majority of this money is in fiat currencies, there’s a great potential for crypto to become big in this field.

People who send money back home usually care about every single cent, which is why the lower cost of transactions makes a huge difference. Also, while it currently may seem like a high-tech solution, the truth is that crypto makes this sort of finance available even to those with no access to the bank.

All you need is a device, and, at the moment, around 6.8 billion people have access to smartphones. In other words, it could make digital money transfers universally viable.

5. Cybersecurity and risk of account takeover

Because crypto is so hard to trace, what would happen if someone took over your account and sent your crypto elsewhere before you could respond? This is not a simple question to answer, and the majority of answers are quite pessimistic. First, there’s a much greater need for a reliable account takeover detection tool.

Due to the nature of blockchain technology, anonymity is high. Sure, you can trace transactions between wallets, but finding a person behind the wallet is nearly impossible. Also, because of DeFi (which has numerous advantageous sides), it’s near impossible to hold someone accountable for this.

The biggest problems are jurisdictional challenges. Crypto travels across borders, and it’s not even regulated in every region. So, finding the right body to handle the issue is not always easy. Government agencies are either reluctant or uninterested in getting involved.

With this in mind, early detecting a takeover is your safest bet.

6. Smart contracts

Thanks to the blockchain, smart contracts are now more reliable than ever. This is because a third party can never tamper with the data in the blockchain. These contracts are quick, binding, and efficient. Instead of waiting for legal confirmation, they are active as soon as the conditions are met.

One of the biggest concerns in the field of contracts is always the counterparty risks. How will you enforce the law if the other party fails to comply? With smart contracts, this process is automatic.

Just because they’re easily programmable, this doesn’t mean that they’re not flexible. The truth is that, with the right approach, one can set them up to handle even the most complex of financial circumstances.

These contracts are also quite easily audited, and it’s much easier to make them compliant (due to their reliability).

7. Next level of digital nomadism

Imagine you’re a foreign remote worker with sizable funds who has just decided to fulfill their lifelong dream of moving to New York. If you have the majority of your assets in crypto, this migration can be even smoother.

First of all, you can make easy and fast cross-border payments. This means you can settle things in the US before moving and continue settling things back home (like the remittances we’ve already discussed) even after the move.

A high currency exchange fee is probably one of the biggest financial concerns. While you can sometimes get a better deal, this often takes too much work. With cryptocurrencies, this is not a problem that you’ll ever have to worry too much about.

Lastly, if you highly value your privacy, knowing that transactions made with cryptocurrencies are pseudonymous will mean a lot.

8. Job creation

With an ever-growing crypto industry, there’s an increased need for blockchain developers, cryptocurrency miners, and posts in blockchain-based startups. Then, people are needed at cryptocurrency exchanges and in blockchain consultancy enterprises.

However, it’s worth noting that most of these posts are highly automated and that they don’t employ as many people as you think. They certainly don’t employ as many people as the old-school bank-based system they’re replacing.

The very point of DeFi is that it doesn’t need to feed as big of a bureaucracy. After all, this is how it can afford to remain profitable with such low fees - most of its processes are automated, avoiding unnecessary over-employment.

In other words, the net number of jobs created this way might not necessarily be positive.

9. New assets

Perhaps the biggest and the most prominent difference in finance is the arrival of new assets to the stage. While they are all grouped under the name of the cryptocurrency, there’s a great difference between:

●       Stablecoins

●       Utility coins

●       AI coins

●       Meme coins

Then, you have the NFT, smart contracts, and other similar digital assets just now arriving in finance.

The bottom line is that these new assets make a huge impact and attract a new kind of tech-savvy investors. Everyone wants to be the one to discover the new Bitcoin, which creates a whole new generation based on the myths of the first crypto millionaires.

Sure, crypto is still not as big as stocks and traditional assets, but it gives investors a new asset type to help them diversify their portfolios.

10. Technological advancement

Never before was so much computing power and interest directed toward the growth of a digital trend. When Bitcoin first exploded, more people than ever started mining. This has caused a massive shortage (and increase in price) of computer parts (especially GPUs) across the globe.

As a result, people and organizations poured millions and billions into this industry. This facilitated the development of potent and sophisticated hardware far more quickly.

The cybersecurity provided by blockchain technology has no equal in this field, and it would have been impossible without this growth of crypto.

Many underlying technologies developed alongside crypto, with some projects even completely funded by crowdfunding crypto projects. Overall, with such an interest and resources, trends started developing at an unprecedented pace.

The impact of cryptocurrency on the global economy has too many layers

As you can see, cryptocurrency has the potential to impact every single aspect of the global economy, from our paying habits to new technological development.

Sure, the technology is still unregulated, and handling all the security and tax-related issues is hard. Still, this shouldn’t be impossible to handle with the right tools.

Now, will cryptocurrency ever replace fiat, or will it just remain one of the asset types (used completely separately from this traditional payment system)? We’ll have to wait and see.

By Srdjan Gombar

Veteran content writer, published author, and amateur boxer. Srdjan is a Bachelor of Arts in English Language & Literature and is passionate about technology, pop culture, and self-improvement. His free time he spends reading, watching movies, and playing Super Mario Bros. with his son.