Could crypto succeed cash as a day-to-day medium of exchange?

The rapid rise of cryptocurrencies over the past decade has been remarkable. However, fluctuations in worth often make cryptocurrency an unreliable investment, and its value is unpredictable. What exactly are the uncertainties underpinning cryptocurrencies? What determines their worth? And can they ever be trusted for day-to-day payments?


This is a contributed article by David Ritter, Financial Services Strategist, CI&T.


The rapid rise of cryptocurrencies over the past decade has been remarkable. However, I still feel for the crypto miner who famously exchanged 10,000 of his bitcoins for two Papa John’s pizzas twelve years ago. Today, those 10,000 bitcoins would amount to roughly £312 million—enough to buy a generous slice of the restaurant chain. 

But it’s these fluctuations in worth that often make cryptocurrency an unreliable investment. While steadier interest rates and economic growth in part dictate the value of fiat currencies, the value of crypto is far more unpredictable. Still, it’s quickly becoming a popular bet for both pro and amateur investors.

Almost one in five Britons have now bought a cryptocurrency. The government is exploring the launch of a central bank-backed ‘Britcoin,’ and Superbowl viewers sat through six cryptocurrency exchange ads during the event’s famous commercial breaks.

We need to investigate the uncertainties underpinning cryptocurrencies, what determines their worth, and whether they can ever be trusted for day-to-day payments. Could bitcoin replace cash, or is it just a glorified form of gambling? Let’s take a look.

It’s tough to place an accurate value on crypto

As with gold, scarcity is often the most significant crypto demand and price driver. For instance, there’s a strict limit on the amount of bitcoin that can ever exist—21 million.

But buying cryptocurrencies is chiefly a speculative play, with most consumers betting on value rather than using them for everyday purchases. It’s therefore tough to assess crypto’s suitability as a long-term medium of exchange. After all, you wouldn’t want to risk spending your bitcoin on a car, a holiday, or even two pizzas, when its worth could soar shortly afterward. Moreover, these tokens are often used in illegal activities, with criminals laundering as much as £6.4bn of cryptocurrency in 2021 alone.

As a result, established financial institutions are still hesitant to engage. The crypto industry is very much in its infancy, and regulators need to work out how to monitor trading without suffocating the freedom that’s brought it thus far. So, how should crypto evolve to enable progress?

Legislation is a necessity

At present, cryptocurrencies operate on ‘decentralised exchanges’. In other words, there isn’t a singular authority, such as a central bank, in control, leaving crypto free to tick over without supervision. And although this can boost industry innovation and allow for trader anonymity, it’s a big reason crypto has become a hotbed for phishing, fake giveaways, and pump-and-dump schemes. Then, if an investor falls victim to such a scam, they have scant protection or recourse over any lost assets.

Rules and regulations are now crucial to cryptocurrency’s future viability, bringing stability, confidence, and security to the ecosystem. But unfortunately, there’s currently little agreement on what or how these laws should govern.

A lack of international cooperation on crypto means that each country may enact its own laws. As a result, emerging countries that lack power in the current global financial system could accelerate economic growth by adopting crypto. Indeed, Africa features six countries in the top 20 for crypto adoption

Meanwhile, countries’ central banks are looking into creating digital currencies (CBDCs), which would support speedier monetary policy changes and a clearer picture of financial health. CBDCs could reduce the cost of fiat money transfers—however, progress on this front is slow. Crypto-based global commerce opportunities should arise when we see agreements around international monetary policies with equal financial instrument representation.

Banks must determine how to get involved

Today, cryptocurrency transactions are slow and inefficient. For instance, an average bitcoin exchange can take around ten minutes to be finalised. But through blockchain’s capacity to create new programmatic financial instruments, technology emerging upon that infrastructure is enabling various new use cases.

Networks like Lightning facilitate faster payments and scalable transactions, boosting cryptocurrency beyond its original foundations. However, if financial institutions want to hold onto market share, they need to build more solutions with crypto tokens.

Here, the opportunities appear endless. The technology offers incredible potential for new, monetisable services, from crypto credit cards to interest-bearing accounts, even to collateralized loans. Moreover, some banks are far ahead of the curve, with JPMorgan already building multiple offerings such as a digital coin for payments.

What’s next?

Though speculation still drives crypto value, and regulators have yet to gain control, the coming decades could see significant change.

Concerns around criminality are slowly being appeased, with ‘Know Your Customer’ and anti-money laundering processes growing in popularity with crypto players. Couple these steps with an agreed-upon regulatory regime, and more investors, financial institutions, and consumers will begin to embrace the advantages of cryptocurrency.

Then, who knows? Could crypto serve as a day-to-day alternative to cash someday, as cards do today? Will increased adoption limit volatility? I say yes to both, and these developments may come sooner than you think. So, if we want to enjoy prosperity in the inevitable future of crypto commerce, it’s time to prepare now.

As Financial Services Strategist, David Ritter is responsible for cultivating CI&T's go-to-market strategy in financial services, leading on technology-solutions market with forward-looking, actionable research and strategic insights. Prior to this, he spent over 5 years as a Senior Analyst at Bloomberg for fintech, payments and consumer finance, where he conducted comprehensive research into banking and payment offerings of Big Tech, growth and monetisation of P2P payment applications, and identified innovations in payments, consumer and small-business lending, and mobile banking.