crypto’s use as currency is growing
Cryptocurrencies,  Technology

Although ranked last for trustworthiness, crypto’s use as currency is growing

60% of those polled are currently using cryptocurrencies for day-to-day purchases or plan to do so within a year, according to an Economist Intelligence Unit survey

Cash is no longer king in the global economy—but according to a new report, cryptocurrencies face an uphill struggle against distrust to be crowned as its anointed successor. 

A new report by the Economist Intelligence Unit paints a picture of banknotes being banished in favor of digital payment methods ranging from debit and credit cards to payment apps like Apple Pay, PayPal and Square’s bitcoin-friendly Cash App. Cryptocurencies are solidly in the mix, thanks to a small but growing contingent of consumers using the likes of Bitcoin, Ether, and XRP on a daily basis. 

Of the 3,000 people who were polled for the “Digimentality: Fear and favoring of digital currency,” a surprising 15% of those questioned said they used digital currencies for more than half of their total purchases. Exactly how they’re doing this isn’t clear—after all, crypto isn’t commonly accepted as a payment method. A further 24% use crypto some of the time, and 20% intend to within the next 12 months. 

Nearly 60% will use crypto for payments by 2021 (Photo: Economist Intelligence Unit).

However, fully one third said they have never used cryptocurrencies… and have no plans to whatsoever.

The Economist also asked about the main reasons for using a digital currency. Online purchases and payments topped the list at 34%. Having a general interest in it as a technology, and treating it as a short-term speculative investment, were in joint second at 24%. Some 23% regarded crypto as a long-term investment, while 22% pointed to how it could be used for exchanging foreign currencies.

All told, this suggests that almost 60% will be using digital currencies to some extent by 2021. 

Aware but averse

But given that cryptocurrency awareness has now hit 85% worldwide, it seems the industry needs to go on a massive charm offensive to win people round—and the campaign would need to start in developed countries.

In these larger economies, just 19% own and 9% use cryptocurrencies. Contrast this with developing markets, where 41% own and 23% use these assets.

The Economist Intelligence Unit found that awareness of cryptocurrencies is streets ahead of the central bank digital currencies (CBDCs) being developed to rival them. Alas, it seems that awareness doesn’t necessarily translate into trustworthiness.

Blame Silk Road (Photo: Economist Intelligence Unit).

Poll respondents were asked about how trustworthy they find digital currencies in four different flavors. Almost 40% described decentralized assets such as Bitcoin as untrustworthy, with just 26% finding them to be dependable. 

Despite the fact that BTC has now been around for more than 10 years.

That suggests constant headlines about hacks and volatility—as well as criminal uses—have made the public more prepared to trust digital currencies that don’t exist yet than those with years of price history and established use cases.

Contrast that with attitudes to as-yet-launched projects from the likes of Facebook, JPMorgan and the People’s Bank of China. Just 23% of respondents said they would find a digital currency issued by a large, international technology firm to be untrustworthy (Libra, anyone?), while 36% said they would regard it as trustworthy. 

The figures improve even more for digital currencies issued by large, international financial firms (21% not trustworthy versus 40% trustworthy,) and digital currencies issued by their local government or central bank (14% not trustworthy versus 54% trustworthy.)

Cashing out

Overall, it could be some time before the public is willing to let go of cash altogether. The report sets out 10 hurdles that digital currencies face before they can achieve mainstream adoption. They include how these assets are often difficult to understand, lack security and utility, and can be hard to find for the average consumer.

Not content with knowing everything there is to know about their users, companies such as Facebook are now investing aggressively in this space. The social network has dipped its toe into the water with Facebook Pay, where payments and purchases can be made directly through its platform. Analysts at the time said this service would likely allow the tech giant to test the waters ahead of the launch of Libra, a much more radical product featuring stablecoins and permissioned blockchains.

Indeed, Libra did prove far too radical for the likes of many regulators and central bankers—prompting demands for Facebook to slam the brakes on the project until a seemingly endless myriad of legal hurdles could be surmounted. Last week, the controversial project was watered down substantially—with its white paper completely rewritten to win key decision makers round. Single currency, Libra-branded stablecoins (starting with dollar-, euro- and pound-denominated tokens) are now going to be offered alongside the initially planned Libra payment token, which is to be backed by those stablecoins rather than directly by fiat assets.   

The Economist Intelligence Unit’s report provides us with an insight into how the public feels about digital currencies as a whole, and who they trust to deliver them. It’ll be heartening news for the major economies currently trying to digitize banknotes, encouraging for financial institutions and the fintech firms nipping at their heels, and mixed news for those who support the decentralized currencies that were meant to represent the new world order. 

While improving, trust levels and usage of BTC are languishing at the bottom of leaderboards, but the cryptocurrency lacks one clear, trusted voice that can tell the public why it offers something Silicon Valley, Wall Street and Beijing will never match.

C Sephton is a journalist with an interest in cryptocurrencies, personal finance, and financial inclusion—as well as the challenges the crypto industry faces in achieving mainstream adoption. He owns cryptocurrencies.