What are the great challenges of digital currency (the challenges of digital currency becoming real money)?

The great challenges of digital currency, what are they? At the beginning of the birth of Bitcoin, people raised many questions when judging transactions. But as Bitcoin has become more and more popular, various factors have created a significant difference in this comparison: many people believe that digital currency is a new investment tool or investment strategy.

Due to the different types and characteristics of digital currencies, there are certain limitations. For example, there are already a large number of mainstream cryptocurrencies such as Bitcoin Cash in circulation on the market and in exchanges. Although these exchanges have opened many accounts and provide services to users, they still have not opened more accounts. This can result in some investors being unable to use the system and suffer financial losses. This means that to become a listed company, there needs to be specialized software for financial management, accounting processing, and other business-related operations. So, what are the major obstacles for digital currencies to achieve this? What is the biggest problem of digital currencies? Why use blockchain technology? Because blockchain is a decentralized distributed accounting method and network protocol, and its essence is to ensure the security of information and data; in addition, blockchain itself cannot directly control all nodes.

The challenges digital currency faces in becoming real money

Translator’s note: This article is from Odaily Planet Daily and is authorized to be reproduced.

With more and more digital currencies entering the mainstream financial market, the popularity of encrypted assets is increasing, and a real form of legal tender (such as Bitcoin or Ethereum) may become a new means of payment and transaction medium, which is an indispensable element and a potential challenge to fiat currency.

Although digital currencies have obtained regulatory approval and legalization in some countries, the intergenerational costs of existing in a legal form are still high and unstable—especially for ordinary people. If they cannot accept value storage methods like gold for daily consumption, their economic activities will face great risks. Therefore, “digitalization” is also considered a very important issue. The world is currently in a new era supported by governments and participating by private enterprises. Central banks around the world hope to solve various problems caused by the current use of cash by issuing their own CBDCs or other types of digital currencies. But will this situation change? The answer may be yes.

From the current perspective, more than 60% of central banks worldwide have not yet launched CBDC plans. Although most central banks are actively exploring the development prospects of CBDCs, they have found many obstacles in practice. These obstacles include the lack of legal enforceability and the over-reliance on intermediaries. The “Libra” project has always been a topic of discussion about the development of digital currencies. However, because it is still in the early stages, it does not mean that its future will not be realized: “What we must admit is that people still worry that compared to traditional currencies, they will have more competitors.” In addition, a recent report released by Facebook shows that Facebook’s Libra project has gained the support of “millions of people worldwide.” At the same time, China has also begun to build its own digital renminbi system. On May 18, 2017, the governor of the People’s Bank of China, Yi Gang, stated that he wanted to complete the research and development of the legal digital currency as soon as possible and provide suggestions on how to operate the system; by the end of June, Article 9 of the “Foreign Exchange Management Regulations of the People’s Republic of China” clearly stated that all companies included in China’s “Rules on the Capital Account Convertibility” (draft for comments) will be subject to strict requirements. According to relevant regulations, no organization or service company can be left out.