Is Bitcoin Adoption Really on the Horizon?
Bitcoin entering the mainstream is farther than it seems.
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Recent reporting and several surveys imply a surge in cryptocurrency adoption. From recognition to ownership, cryptocurrency — and Bitcoin in particular — are sweeping over mainstream America and beyond. Upon closer examination, however, this does not seem to be the case.
The majority of Americans (79%) are familiar with Bitcoin and one-third believe cryptocurrency will become mainstream within the next 10 years, according to a YouGov report. The implication here is that Bitcoin (and hence cryptocurrency) is gaining popularity in the collective consciousness. The next statistic, however, is that only 13% have heard of Ethereum, the second largest crypto asset with a market cap of over 20 billion dollars. The report continues stating that of the 79% who have heard of Bitcoin, 89% have had no interaction with it whatsoever. While 36% said cryptocurrencies would be widely accepted for legal purchases, an equal number (34%) said the opposite. This “popularity” seems to come from cryptocurrencies tied to illicit activity:
“One quarter (25%) say they think cryptocurrencies are used more for illegal purchases rather than legal ones. Only 17% think they’re used more for legal purchases, and 19% think cryptocurrencies are equally used for legal and illegal purchases.”
Another survey from the financial services firm Finder showed the number of Americans who actually own cryptocurrencies has nearly doubled in 2019, an increase of over 80% in one year. However, the doubling of 7.95% to 14.4% is hardly a reason to start sounding the alarm. The median amount of cryptocurrency in each respondent’s wallet was a mere $360. This tiny increase in ownership pales in comparison to the general sentiment:
“While an increase of people with a cryptocurrency is positive for the industry, the vast majority of Americans are not investing in digital currencies. Of the Americans we analyzed, 47.9% (about 103.4 million Americans) say it’s too complicated or difficult to understand. Closely following are people who say they either aren’t interested (45%) or think crypto is too much of a risk (23%).”
A similar report conducted by Crypto Radar and touted as “the largest Bitcoin ownership survey” revealed that only 6.2% of Americans own Bitcoin, while 7.3% are planning to buy some. Specific financial figures are not given, but it’s clear that people are buying “some” Bitcoin. The survey concludes with the following investment outlook of investors:
“Unsurprisingly, the overwhelming response of Americans who participated in the survey indicated that they neither owned, nor planned on investing in Bitcoin. A full 64.8% stated this was their stance.”
The release of an update to the Bank of Canada’s 2017 Bitcoin Omnibus Survey provides yet another optimistic outlook. There was an “increase in public awareness” of Bitcoin from 64% to 85%. People are indeed more aware of something called “Bitcoin.” There was not, however, a “significant” increase in ownership from the 2.9% to 5% from 2016 to 2017. The study concludes with the suggestion that “future research may consider other cryptocurrencies and financial technologies.”
Financial institutions are taking an optimistic look at digital assets as well. Chainalysis conducted a survey in a recent blog post asking what finance professionals think about cryptocurrency. They were asked what percent of retail customers transact with cryptocurrency business. 32.8% said none. 13.5% said not sure. Any significant use hardly topped 10%. This does not seem like adoption on the horizon.
This struggling sentiment is not limited to North America, either. A report conducted by the U.K. Financial Conduct Authority revealed that 70% of those surveyed did not even know what a cryptocurrency was. Only 3% have every bought a digital asset, and only 7% would ever consider buying cryptocurrencies in the future. Also noted was 40% of cryptocurrency holders planned on keeping it for more than three years, or have already sold it. This does not demonstrate anything remotely close to mainstream.
Criminality and Cryptocurrency
One area definitively showing growth: crime. Although the proportions of Bitcoin transactions used for illicit activity is decreasing, crypto is still widely used for everything from drug trafficking to child pornography. Another survey by Chainalysis reported by Bloomberg earlier this summer estimated one billion dollars would be spent on the dark web this year:
“The findings are a reminder of the regulatory risks surrounding the digital tokens, which are beloved by criminals looking to preserve some degree of anonymity.”
Although large gains have been made in combating illicit cryptocurrency activity, advancements in technology are making it harder to keep up. An article in The National Law Review outlining the major threats from illegal cryptocurrency activity points to the emergence of coins specializing in anonymity:
“The most concerning of these related to money laundering and other illicit activities are Anonymous Coins since their higher degree anonymous transactions can make it even more difficult to trace. Some of these newer cryptocurrencies such as Zcash and Monero already provide far more robust anonymity than Bitcoin which raise new challenges in identifying and tracking criminal and terrorist targets.”
The Restraints of Regulation
This leads us to the question of regulation, the most important question concerning mainstream cryptocurrency adoption. An October report by Europol, a European Union law enforcement agency, set out to highlight the most significant organized crime threats facing the world today. Cryptocurrency abuse was among the top concerns:
“While cryptocurrencies continue to facilitate cybercrime, hackers and fraudsters now routinely target crypto-assets and enterprises.”
A Nov. 5 Forbes article outlines the very real threat posed by decentralization:
“The problem that exists for the cryptocurrency and blockchain industry—one that will not go away anytime soon—is less the cryptocurrency part and more the decentralized part. The idea of miners all over the world validating transactions versus a centralized bank is the part that seems to throw any type of common BSA examination into disarray.”
While any increase in use and awareness of cryptocurrency is a good sign for the future, people should be cautious about hyping up insignificant reports and inconclusive reporting concerning mainstream adoption. The focus should fall on significant legislation and adoption by major financial institutions instead of paltry increases in awareness and the average investor buying a few dollar’s worth of Bitcoin.