National cryptocurrency: opportunity or risk for the cryptocurrency market

Even a couple of years ago, the word “cryptocurrency” caused confusion among most people. Today, more and more people want to be traders and earn on Bitcoin and other digital coins. Moreover, the popularity of cryptocurrency has reached such a level that some countries are seriously talking about creating national cryptocurrencies. Is there any reason to take such statements seriously? Will national digital currencies be able to make a difference in the cryptocurrency market? Is it worth investing in them and what should investors expect? Let’s figure it out.

What is national cryptocurrency

Experts agree that in ten years from now a cryptocurrency is fully capable of becoming an ordinary means of payment that will be used throughout the world.


Already, many online stores and other services have switched to paying for cryptocurrency and even financial sector enterprises are eyeing cryptotechnologies. For example, US banks are actively testing Ripple technology and many Asian companies are switching to the NEM algorithm.


Some countries have banned the use of cryptocurrency, others have imposed restrictions on its turnover and still others have recognized the official means of payment. However, they all understood that if the cryptocurrency still outweighs ordinary money, the only survival option for official banknotes would be to switch to the cryptocurrency format.


The idea of a national cryptocurrency appeared – a digital equivalent of the official currency of the country, operating on the basis of blockchain or other cryptotechnology.


However, so far only some countries have declared the creation of national cryptocurrencies. It is noteworthy that many of them view their own electronic coin as a means to solve financial and socio-economic problems.

National cryptocurrencies: advantages

If you compare the national cryptocurrency with conventional money, there are two main advantages – ease of use and a high level of security.


Modern cryptocurrencies are well protected from hacking, cyber-attacks and fraud. Even if the scammer manages to get someone else’s money, the technology of the same blockchain will allow you to quickly install the attacker.


Obviously, the best of the existing technologies will be used to create national cryptocurrencies – for example, Ethereum smart contracts or 11-level Monero hashing algorithm.


Another plus of the national cryptocurrency is instant payment. British experts who advocate the introduction of crypto pound are right when they say that digital cash will allow everyone who wants to buy any product in a matter of seconds, be it a microwave, a car, or a whole house.


Add to this the reduction in transaction costs and the absence of intermediary banks, which also charge a fee for their work. Obviously, the national cryptocurrency will allow payments, payroll and social benefits quickly, safely and with a minimum of costs.


National cryptocurrency has advantages in comparison with ordinary coins. First of all, it is the adoption of public institutions. If the national cryptocurrency is approved at the state level, all financial structures of the country will be obliged to accept it. The cryptocurrency will become an absolutely legal means of payment.


Moreover, many experts believe that the national digital currency is a way of “civilized flight” from fiat money, the purchasing power of which is determined only by the state and only in its own interests.


However, the state itself will also benefit, since a) will reduce the cost of servicing the banking sector and b) will receive full control over citizens’ currency transactions.

National cryptocurrencies: disadvantages

If ordinary cryptocurrencies are created by experienced programmers, then government officials are responsible for making key decisions in the context of developing national digital currencies, who most often have neither adequate experience nor theoretical knowledge on this issue. It is not surprising that the same China, which announced the creation of a crypto-bank two years ago, still can not bring it to mind.


However, the main disadvantage of national cryptocurrencies is that they will never become an international payment instrument like the same Bitcoin or Ethereum.


Using the technical capabilities of the blockchain and the characteristics of the national currency, you can create a convenient and secure coin for making payments domestically, but not more.


Anyway, against the background of large-scale crises of the last decade, the idea that the old model of the state economy needs substantial restructuring is widely supported. The widespread use of cryptocurrency can be the first step towards the necessary changes.


In particular, the point of view is often heard that with the active participation of the state, the cryptocurrency will turn into another version of electronic money like WebMoney or EasyPay. After all, the national coin actually loses all the main characteristics of cryptocurrency decentralization, anonymity and the rejection of state control.


Another point of view suggests that the national cryptocurrency is not a kind, but an alternative to the usual cryptocurrency. Anonymous, it can not be, because it is contrary to the laws of most countries. However, it is more reliable and secure than ordinary money.


Thus, the national cryptocurrency is just a convenient way for the state to unload the banking network and control the movement of electronic funds of citizens.


Of course, investors in this case are more concerned not with the advantages of national cryptocurrencies for states and citizens, but with their influence directly on the cryptocurrency market. Does it make sense to focus on them in their own activities?

Will it make money on national cryptocurrencies

National digital currencies can solve some financial problems of the state, but they will not be able to compete with bitcoin or other popular cryptocurrencies. After all, their value will not be determined by the demand in the cryptocurrency market, but by the volatility of the national currency.


Almost all planned national cryptocurrencies will be tied to official currency notes. That is, a crypto pound will cost as much as a pound sterling and J Coin – the same as the Japanese yen.


The only exception may be El Petro, which will be tied not to the bolivar (the official coin of Venezuela), but to oil. However, given the difficult economic situation of Venezuela and the foreign policy pressure on the country, it is now very risky to invest in its national cryptocurrency.


The idea of national cryptocurrency is quite good, but from the point of view of investment attractiveness, such coins have practically no value. Experts claim that their appearance will not change the situation in the cryptocurrency market. They are a convenient means of payment for states, but not an attractive option for making money. So it makes no sense to invest in them – it is the same as investing in electronic hryvnias or rubles.


You can buy digital money of those countries whose currency tends to grow in value of course. For example, residents of the CIS could invest in cryptodollars. However, so far the United States is not going to issue a national cryptocurrency. Even if they were released, the profit from the purchase / sale of the same dollar can not be compared with the earnings from the races of the bitcoin, ethereum or lightcoin races.


As for the top cryptocurrencies, their value should not change with the advent of national digital currencies. Many traders are worried that the release of crypto pounds or cryptocron will lead to an outflow of capital from the cryptocurrency market. However, experts assure that this will not happen.


Vitaly Buterin, the creator of Ethereum, says that developers of ordinary cryptocurrencies and their holders have nothing to worry about. Even if the states can launch their own digital currencies, users will not massively merge their savings in bitcoins or ethereums, thereby derailing the market.


National cryptocurrencies will be needed only for domestic payments. Only anonymous and decentralized coins are suitable for earnings, the value of which is determined by the demand in the cryptocurrency market.


So, thinking about investing in national cryptocurrencies so far makes no sense. However, you should not worry – in the coming years they will not change the balance of power in the cryptocurrency market.


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