Introduction
A cryptocurrency is a digital form of payment that employs encryption algorithms. Cryptocurrency development was propelled by encryption technology that designed a form of payment used in the digital market space. Encryption technology makes it both a payment method and an accounting system as it keeps the records of each transaction (Manjula et al., 2022). Although cryptocurrency is unlikely to replace the traditional payment method, it will revolutionize virtual transactions by creating a free-flowing system without trade barriers. The encryption features of cryptocurrency will foster the security of digital transactions. Overall, cryptocurrency will likely cause economic shifts in the global market, but traditional payment methods will still dominate. Therefore, the problems associated with cryptocurrency, an organization that has dealt with such problems, potential solutions, and recommended strategies for implementation will be discussed in the literature review.
Literature Review
Problems Associated with Cryptocurrency
The authors Sagheer et al. (2022) highlight the problems of online scams. Online scams have increased with the elevation of cryptocurrency usage. Online scammers use Bitcoin and other cryptocurrencies to entice people to invest with the aim of expanding their profit margins. People fall for the scam because it promises a massive profit with low investments. The scammers will also provide appropriate information about their earnings, false clients, and the possible profitability upon investment. Other scams involve creating fake platforms for cryptocurrency trades. The platforms are created to mirror the actual sites such that potential investors are unlikely to notice the difference. Another online risk for cryptocurrency investors is phishing (Tredinnick, 2019). Phishing is targeted attacks on an investor’s account to obtain their sensitive information, including their crypto keys. With the crypto key, the scammer can manipulate the investor’s account to their own benefit. Such risks make people reluctant to invest in cryptocurrency trading.
Sagheer et al. (2022) literature also outlines the issue of the lack of a regulatory system for crypto trading. Cryptocurrency trade is decentralized without a statutory regulation that protects investors. The lack of regulations discourages many people from participating in the crypto trade. Regulations are established to protect stakeholders. Thus, its absence in crypto trading demotivates many. Likewise, the lack of government intervention has challenged the stabilization of the cryptocurrencies like bitcoins. The value of cryptocurrencies keeps changing, and as a result, many organizations have declined. The instability of the cryptocurrencies challenges even organizations with superior information systems and resources to deploy in making viable predictions. Sagheer et al. (2022) further explain that the lack of formal regulation of cryptocurrencies has limited its acceptance as a legitimate and universal payment system. Organizations are reluctant to pursue cryptocurrency because it is a risky venture with many vulnerabilities to investors. Moreover, lack of formal recognition lowers its perceived value. The lack of a regulatory body and resultant risks discourage individuals and organizations from venturing into it.
Cryptocurrency trade requires competency in digital systems (Sagheer et al., 2022). Trading activities occur over online platforms; thus, investors require basic knowledge of computer systems to navigate. Poor skill sets discourage many from participating in cryptocurrency trading. Moreover, Sagheer et al. (2022) explain that blockchain systems are complex. The system incorporates features like encryptions that many investors are unable to handle. Therefore, crypto trading platforms are not easy to use. Consumer unfriendliness creates negative perceptions in individuals and organizations regarding trading systems. More than that, the negative attitudes make potential investors unwilling to participate in the cryptocurrency trade.
The author Tredinnick (2019) describes the concern of cryptocurrency’s immunity to economic conditions like consumer needs. Economic conditions determine the value of products and services. They affect the demand and supply as well as the perceived value of a commodity. The minimal association between economic conditions and cryptocurrency trading discourages many investors from venturing into it. Tredinnick (2019) also emphasizes that the lack of relation to economic conditions results in its minimal impact on crucial economic sectors like education. Such sectors impact the development or decline of the economy. Therefore, the minimal influence of cryptocurrency on such sectors lowers its value to profit-seeking investors.
Furthermore, Tredinnick (2019) mentions the issue of power consumption during cryptocurrency trading activities. Cryptocurrency trade encompasses a lot of data processing which consumes high electrical energy. As a result, the power bill is high for cryptocurrency traders. The expense demotivates many investors from venturing into the crypto trade. Additionally, Tredinnick (2019) supports that power consumption and high processing speed features limit people’s choices when purchasing devices. A crypto trader must be able to support high-speed transactions and energy dissipation without malfunctioning. Since cryptocurrency trades are time-sensitive, hardware breakdown is prevented at all costs.
Company That Has Dealt with Problems Affecting Cryptocurrency
Binance Company Limited is one of the major investors in the crypto trade. Binance has about 140 million registered users who investors and earn through its platform. Additionally, Binance offers more than 350 cryptocurrencies, including Bitcoin, BNB, Ethereum, Galxe, and Green Metaverse tokens (Tredinnick, 2019). Binance trade volume of more than 38 billion dollars entices many people to invest in the trade (Cumming et al., 2019). More than that, it charges a meager transaction fee of 0.10%, which further lures many investors to crypto trade. The Binance website also provides a platform where news updates on crypto trade are posted to inform traders about market conditions. The information influences traders’ investment decisions as well as encouraging new investments.
Furthermore, the Binance platform offers quality security for crypto traders. New users create an account where their confidential information is stored for easy access. The system requires the users to provide a strong password. The password is required each time the user engages in trade. The verification process ensures that the user’s account cannot be accessed by another without their authorization (Cumming et al., 2019). Additionally, the user can fund their account through various methods without security concerns. Another user-friend feature of Binance accounts is that reimbursed accounts can instantly engage. The platform is also easy to navigate to inconvenience traders. Moreover, end-to-end encryptions protect trade transactions, allowing only user control. Overall, the Binance trading platform is designed to give a trader full power over persons and gadgets that access account information.
Major challenges of cryptocurrency
Although cryptocurrency faces many challenges, the most significant ones have the most impact on discouraging trade. For instance, online scamming risks demotivate many individuals and organizations from participating in the crypto trade (Tredinnick, 2019). The issue is emphasized by the heavy financial investment involved and the fact that all transactions are digitized. The potential loss of invested money demotivates many people from engaging in crypto trade. Additionally, the lack of central regulation makes many perceive crypto trading as a risky venture. The risk reflects in the decline of many organizations that have invested in cryptocurrencies. The risk stems from the instability of the crypto value and lack of formal recognition as a legitimate payment method. Another major concern is the immunity of cryptocurrencies from economic conditions (Tredinnick, 2019). Economic conditions influence the consumption and value attached to products and services. Furthermore, the economic conditions harmonize all trading activities. Therefore, the minimal interaction between cryptocurrencies and market conditions makes many investors disregard their value.
Possible Solutions to Problems Associated with Cryptocurrency
The authors Katuk et al. (2023) suggest several strategies for crypto trade challenges. For instance, introducing trade laws will legitimize crypto trading. Trade laws enacted by a central body like the government will not only provide formal recognition of cryptocurrencies but will stabilize the value of crypto coins. More than that, regulations will widen the acceptability of crypto trade to many economic sectors. Katuk et al. (2023) also propose that introducing a taxation system will further legitimize the crypto trade. Taxation also creates close relation of cryptocurrencies to the economic conditions of the global market. Such an approach will also instill confidence in investors in the trade. Tredinnick (2019) then proposes that assigning cryptocurrency the value of physical assets will change people’s perceptions towards it. Currently, cryptocurrencies are regarded are intangible assets which, in a way, implies they have no value in the physical world of trade. Therefore, using blockchains to attach value to cryptocurrencies concerning tangible assets will increase people’s affinity to them. Tredinnic (2019) also outlines the issue of supply chain management of cryptocurrencies using blockchain system records to validate the value of cryptocurrencies. Supply chain management will propel the acceptability of cryptocurrency as a legitimate payment method. Moreover, the introduction of smart contracts further validates crypto trade. Smart contracts are digital agreements for alliances in the crypto trade. Such contracts will allow for involved parties to set terms and conditions that are legally actionable.
Recommended Solution
Centralized regulation of cryptocurrencies will address most of the challenges traders face (Silva & Mira da Silva, 2022). Central authority is speculated to widen investors’ trust in the crypto trade. Currently, crypto trade is decentralized, with its users anonymous. Therefore, the lack of relationship between traders challenges forming of trust. Therefore, a centralized authority recognized by all crypto trade stakeholders solves the anonymity issue. Additionally, Silva & Mira da Silva (2022) lists various control systems in crypto trade, including blockchain, sidechain, tangle, and hash graph, which are technologies that allow record keeping for digital transactions. The control systems are not formally recognized, but traders implement them based on the evaluation of their features. Moreover, the systems are irregulated, so neither stakeholder claims accountability to them. Thus, regulating such systems, which are critical to trade, will revolutionize it toward a better position in the global economy.
Furthermore, regulating crypto trade will assign stable value to cryptocurrencies. Right now, the values of cryptocurrencies have shifted drastically to the volume of transactions (Silva & Mira da Silva, 2022). Therefore, the system is prone to misuse, fraudulent activities, and manipulations. Specifically, the power of investors to directly influence the value of cryptocurrencies causes difficulties in managing the market and prices. Therefore, integrating central control of digital trade establishes the ground for creating policies to protect investors and the integrity of the trade (Silva & Mira da Silva, 2022). More than that, crypto trade regulations will motivate the invention of financial asset classes and the participation of banking systems.
Implementing regulations in cryptocurrency trade will involve making critical adjustments to the current systems. The first strategy is creating crypto assets v (Melo et al., 2022; van der Linden & Shirazi, 2023). Moreover, recognizing centralized entities providing wallets and setting exchange rates will establish trust in the activity. Moreover, creating a standard valuation of cryptocurrencies will instill people’s confidence in digital trade (Cumming et al., 2019). The aforementioned regulations will be integrated to form a global standard that manages the crypto trade. Consequently, some risks, such as the instability of cryptocurrencies, will be mitigated by increasing the acceptability of crypto trade in the global economic environment.
Conclusion
Cryptocurrency refers to a digital trade system. It faces many challenges, including vulnerability to online scams, lack of a centralized regulation system, need for competence in computer systems, and high consumption power. Binance, as one of the significant cryptocurrency investors, has dealt with such challenges. Potential solutions to the above shortcomings comprise strategies like introducing trade laws, taxation, stabilizing the value of cryptocurrencies, and implementing supply chain management. Of all solutions, regulating the crypto trade is likely to have the most positive impact on crypto trade. The solution can be implemented through the standardization of crypto trade.
References
Cumming, D. J., Johan, S., & Pant, A. (2019). Regulation of the crypto-economy: Managing risks, challenges, and regulatory uncertainty. Journal of Risk and Financial Management, 12(3), 126. https://doi.org/10.3390/jrfm12030126
Katuk, N., Abd Wahab, N., & Kamis, N. S. (2023). Cryptocurrency estate planning: The Challenges, suggested solutions and Malaysia’s Future Directions. Digital Policy, Regulation and Governance, 25(4), 325–350. https://doi.org/10.1108/dprg-10-2021-0126
Manjula, B. C., Shilpa, B. S., & Sundaresh, M. (2022). An analysis of a cryptocurrency, Bitcoin, and the future – research gate. https://www.researchgate.net/publication/316656878_An_Analysis_of_Cryptocurrency_Bitcoin_and_the_Future
Melo, F., Sugimoto, N., Bains, P., & Ismail, A. (2022). Regulating the crypto ecosystem. FinTech Notes, 2022(007), 1. https://doi.org/10.5089/9798400221361.063
Sagheer, N., Khan, K. I., Fahd, S., Mahmood, S., Rashid, T., & Jamil, H. (2022). Factors affecting adaptability of cryptocurrency: An Application of Technology Acceptance Model. Frontiers in Psychology, p. 13. https://doi.org/10.3389/fpsyg.2022.903473
Silva, E. C., & Mira da Silva, M. (2022). Research contributions and challenges in DLT-based cryptocurrency regulation: A systematic mapping study. Journal of Banking and Financial Technology, 6(1), 63–82. https://doi.org/10.1007/s42786-021-00037-2
Tredinnick, L. (2019a). Cryptocurrencies and the Blockchain. Business Information Review, 36(1), 39–44. https://doi.org/10.1177/0266382119836314
van der Linden, T., & Shirazi, T. (2023). Markets in crypto-assets regulation: Does it provide legal certainty and increase adoption of crypto-assets? Financial Innovation, 9(1). https://doi.org/10.1186/s40854-022-00432-8
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