Recently, Agustin Carstens, Bank for International Settlements (BIS) chief, made headlines in the financial
world. This was after he acknowledged in an interview with the Financial Times that Bitcoin is very likely to
replace paper money soon.
Agustin pointed out that central banks around the world are likely to end up issuing their digital currencies.
He went on to mention that BIS, which operates as a central bank for other central banks around the globe,
was working on the development of digital currencies for the different national paper currencies.
Apart from the BIS chief, a renowned Australian professor also made headlines for after his confident
prediction that in a decade, bitcoins and other digital currencies will have taken over fiat currency. A lot of
financial experts came out to criticize the forecast calling it unrealistic. Looking at the steps being taken by
BIS; do you think the Australian professor’s prediction is wrong?
In this article, we are going to compressively explore the future of bitcoin and the probability that it will
replace paper money. Moreover, we will explore the factors propelling this cryptocurrency to this
domination path and the challenges it’s likely to face. Before getting into that, it’s vital that you understand
what bitcoin is in case you have been detached from the world the past couple of years.
Bitcoin is one of the most popular cryptocurrency.
Bitcoin as a cryptocurrency is the most popular and valued on the globe today. You must be asking yourself,
what are cryptocurrencies? In simple terms, cryptocurrency is a digital money. This digital money acts as an
internet-based medium means of exchange that takes advantage of cryptographic functions to facilitate
Cryptocurrency utilizes blockchain technology to verify the transfer of the digital currency and also control
the creation of new money.
The biggest strength of all cryptocurrencies is their decentralized control. This means that no one party,
whether government, individual, or organization has control of the digital currency. New currencies, in this
case, new bitcoin is created through mining using a computer fitted with specialized hardware. Today the
average value of 1 bitcoin is roughly $10,423.10.
Will bitcoin replace paper money?
The answer to this question can easily be a simple yes, but this will not be as accurate. Whether bitcoin will
replace paper money generally depends on several factors working together. Of late, this cryptocurrency has
become increasingly popular for several reasons. These reasons will play a significant role in influencing
bitcoin to replace paper currency.
Factors that are pushing bitcoins to the mainstream
You should know that with the popularity of this digital currency, its value also increases. Here are some
factors that are pushing bitcoins to the mainstream and may facilitate it replacing paper money.
The announcement of Facebook’s Libra
A few weeks ago, Facebook announced that it was planning to launch its cryptocurrency named Libra in
2020. According to the social media giant, Libra will be overseen by a collection of some major companies
and institutions in the world. Just like all the other cryptocurrencies available, Libra would also leverage
Soon after this announcement by Facebook, there was renewed interest in bitcoin from all over the world.
Many financial experts and business gurus, pointed out that if Facebook were to go ahead with its plan, it
would mark the beginning of the journey for bitcoin to replace real money. Many of the experts argued that
despite Facebook being a huge corporation, it’s improbable that Libra would gain a lot of market traction.
Libra opening the way for bitcoin.
Libras main strength is the fact that it is backed by Facebook and other major corporations and institutions
globally. This is also its main weakness as unlike the fully decentralized bitcoin, Libra is centralized, just not
by a government as it the case for fiat currency.
As most people are drawn to cryptocurrency due to its decentralized nature, Libra may not be as lucrative as
corporations govern it. The best option in such a case for most people will be bitcoin.
The rise of institutional investors
As more people are embracing digital currencies, the more institutions globally are opening themselves up to
the idea. There is a rise in bitcoin demand by institutional investors. JP Morgan Chase has made a lot of
progress by incorporating digital currency into its business model. The international bank was the first one to
launch its own cryptocurrency JPM Coin. This is the first cryptocurrency of its kind from such a reputable
The move by JP Morgan Chase has inspired the rise of other institutions like the Greyscale Bitcoin Trust
(GBTC). GBTC has established itself as a financial institution which exclusively invests in bitcoins. By
April 2019, this exclusive bitcoin financial institution has spent more than $1.4 billion on cryptocurrency
investments. The institution currently owns 225,638 bitcoins, which is roughly 1.3 % of the total bitcoins in
In April 2019 along, GBTC bought bitcoins worth $58.2 million, and this shows how confident institutional
investors are in cryptocurrencies, with the success of GBTC, other similar companies like Atecs Capital are also coming up
around the world. This has motivated Fidelity, an asset management company, to start buying and selling
bitcoins for institutions.
TD Ameritrade, an online broker, has also jumped at the opportunity and has begun trading bitcoin features
on its platform. Other companies like E-Trade have put plans also to start trading in cryptocurrency.
Increased readiness to hold bitcoin as an asset
It’s not just institutional investors that are opening the path for bitcoin to go mainstream. Individuals today
are also more ready to trade & hold bitcoin as an asset. The recent study into bitcoin has revealed that more than 98.7
% of the total transactions are exchanges, and only 1.3 % is made up by merchants.
This research clearly shows that bitcoin has not made a lot of progress as a payment system, and a lot of
persons are holding it as an asset. This is similar to how gold works; most people hold the precious metal as
an asset rather than use it in their day to day purchases.
The upcoming halving
The upcoming halving of bitcoins in 2020 will likely strengthen the position of the cryptocurrency in the
market and also bring it a step closer to replacing paper money. A decade ago, when bitcoin started, miners
got rewarded 50 bitcoins for verifying new blocks. In May 2020, the reward will be 6.25 bitcoins. This
means that there will be reduced production of bitcoin despite the increasing demand.
The halving will likely result in the price of bitcoin rising due to scarcity. Additionally, it will result in less
downward pressure for this cryptocurrency over time. This move will protect those holding bitcoin as assets
from losing value over time. With this, investors will be more confident on bitcoins and help it replace paper
US-China trade tensions
The ongoing US-China trade tension has also opened the doors of prosperity for bitcoin. As the Yuan now
has less influence in the west, many Asian traders are turning to bitcoins to continue with their business. The
trade tensions have brought bitcoins to companies which would have otherwise never bothered to take a look
As bitcoin is decentralized, it’s not subject to the impact that US tariffs have had on the Yuan. During this
time, bitcoin has proven just how useful it can be when paper money is not an option. With this occurrence,
other businesses from around the world have started putting in place strategies to start trading with bitcoins.
This is a positive indication that the world is headed in away from paper money and into bitcoins.
How long might it take before bitcoin replaces paper money?
To some extent, despite all the criticism the Australian professor got, he provided the most accurate
prediction on when the cryptocurrency will replace paper money. It is very probable that in the next 10
years, in 2030, there will be no more paper money. Yeah, I know it seems like a long shot, but it’s not.
Here’s is why?
Improvements in blockchain technology
Today, blockchain technology is expanding beyond just cryptocurrencies and is seeing a lot of
improvements. These improvements will trickle down to make bitcoin more stable and less prawn to the
“bubble” bursting. With this rise in investor confidence in the digital currency will be solidified and thus
aiding it to move forward.
Increased access to smartphones
Today, all you need to buy something with bitcoin is an e-wallet on your smartphone. According to reliable
data from Statista, there are currently 2.71 billion persons all over the globe using smartphones. This is
35.13 % of the total world population.
Smartphones are getting cheaper by the day on the lower end of the market, thus allowing more people to
access the latest technology. With this, more persons will be ready and willing to try out new stuff such as
digital currencies. This is as they can take advantage of it from their smartphone. The go-to digital currency
for most people even today is bitcoin. Its growth will be unprecedented in a future where almost everybody
has a smartphone and access to the internet.
The domination of the internet of things
IoT or Internet of Things is not a concept but a reality that keeps getting better by the day. Soon your smart
fridge will be able to order you supplies when you run low and even a cold beverage during a hot day. For
all this to be possible, such smart devices need to be able to process payments flawlessly. This can be made
possible by bitcoins.
At the moment, the biggest challenge is the technology is getting with paper money, and credit cards is that
your details may fall into the wrong hands. This is not possible with bitcoins as blockchain technology is
foolproof. With bitcoins being adopted by smart devices as the secure payment method, the digital currency
will be one step away from replacing fiat currency.
Challenges bitcoin is likely to face to replace fiat currency.
Yeah, the dream of having bitcoin as the main currency is sweet, but before this happens, there are
challenges along the way that have to be overcome. Some of these challenges threaten even the existence of
cryptocurrency as a whole. These challenges include:
Government resistance is the biggest challenge that bitcoin will have to face before it can replace paper
money. Its will be very hard for governments around the world to loosen their regulation to allow the use of
bitcoin as their sole currency.
Yes, today countries like the US, Cannada, Australia, Russia, The European Union, Bolivia, Ecuador, and
Colombia have been pretty lenient to cryptocurrency, but it’s only as a side currency. When it comes to
countries replacing their paper currency with bitcoin, that is another story.
Competition from other cryptocurrencies
Right now, bitcoin is the widely used cryptocurrency, but all these might change when Facebook launches
Libra. It would not be smart to underestimate the power of Facebook and its partners when they launch
Libra. Thanks to their strong market position, they could easily manipulate the global market to gravitate
towards Libra. Though this has a very low possibility of happening, it’s still a real concern.
It’s not just Facebook’s Libra that might come in the way of bitcoin’s success, other cryptocurrencies such as
Ethereum are also growing. Additionally, there always seems to be a new cryptocurrency launched by any
company that can every now and then.
The increasing number of cryptocurrency available will lead to market fragmentation. This will eat away at
the strong market position that bitcoin has, thus preventing it from replacing paper money.
Bitcoin has high chances of replacing paper money as soon as 2030. Though it will be next to impossible for
bitcoin to take over entirely in such a short amount of time, it might be able to account for the more
significant percentage of trade on the globe.
There was a time it was impossible to imagine that e-commerce sites would take over retail stores. In less
than 10 years, it’s today impossible to believe that retail will survive the next decade. In the same manner,
bitcoin is very likely to find success and overtake paper money.