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CAN CRYPTOCURRENCY TAKE ON TRADITIONAL FUNDS?

Many people call cryptocurrency the next step in the evolution of money. Since we have never had money like it before, it’s normal to question the concept and compare it with traditional currencies.

“Business owners need to stay informed on financial trends in order to take advantage of new opportunities,” says Granville Turner, Director at company formation specialists, Turner Little.

Cryptocurrencies and traditional funds share some traits, like how you can use them, or how you can transfer them electronically, although there are some interesting differences:

One of the advantages of conventional currency is that it’s the most widely accepted. It’s supported by multiple payment networks and currency exchanges around the world, mostly because traditional funds are highly stable and well controlled.

Greater control also means central banks can manage various economic factors, such as liquidity, interest rates and credit supply which are key to ensuring a robust, stable economy.

Though traditional currencies are considered stable, economic recessions over the years have highlighted its downfalls. A central bank’s greater control has often done little to stop inflation or recession. However, the notion of central banks control over the economy and the constant increase in global prices has created incentives for individuals to invest in cryptocurrency.

Cryptocurrencies are available at the click of a button, anywhere in the world. And anyone that can make an online transfer, can also acquire and own their digital coin of choice. It means the usual limitations cease to exist when transferring money across borders.

Unlike any other electronic cash settlement systems that can take days to process transactions, cryptocurrencies enable instant settlements. Privacy is another aspect that has made cryptocurrency desirable as users are not required to share their identify in order to complete transactions – also protecting you from identity theft.

One of the most significant disadvantages cryptocurrencies have is the constant price fluctuation. This makes them difficult for users and merchants to accept and use reliably. There is no controlling authority in the bitcoin system, and whilst some see this as an advantage as you are the only one in charge of your money, it also means it’s not possible to reverse a transaction once it’s made.

Cryptocurrencies can be quite challenging to understand, which is another reason why some countries and regulators continue to reject them. But as with any financial decision, acquiring in-depth knowledge is always in your best interest.

At Turner Little, we have decades of experience in wealth management. Talk to us if you’d like to understand more about cryptocurrencies or explore other ways in which you can maximise your wealth.

 

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.