Kane Kalas Weighs In On The Future Of Fiat Currency

The subject of cryptocurrency has been frequently featured in the news cycle for several years now and it looks like cryptocurrency is set to become even more prevalent in the financial sector in the years to come. Despite the potential issues associated with cryptocurrencies, some have predicted that digital assets will replace nearly one-fourth of all fiat assets within the next decade, and have the potential to replace fiat assets altogether at some point in the future. 

So, are digital assets likely to be this destabilizing? Will fiat currencies disappear in favour of virtual alternatives? These are questions that investment manager Kane Kalas has spent years studying. As an early adopter of Bitcoin, he has generally been bullish on cryptocurrency price and adoption, and believes that digital assets due indeed pose a long term competitive threat to fiat currencies. 

The Tight Link Between Fiat Currency And Crypto

Although, at first glance, cryptocurrencies and fiat currencies appear to be completely divergent entities, there are surprisingly tight links between them. For example, a number of fiat currencies have now embraced digitization. Individuals and governments worldwide have been increasingly adopting cryptocurrency due to the numerous advantages that digital assets have over other means of payment such as wire and ACH transfers and cash payments. To Kalas, this increased adoption is no surprise; he has been vocal about the various advantages digital assets offer over traditional payment systems.

Market Capitalization And Crypto

In 2019, cryptocurrencies had a total market capitalization of $302.7 billion.Within two years, that figure has risen considerably. In 2021, all cryptocurrencies together have a total market cap amounting to $950 billon, with $647.2 billion of the total being hold by Bitcoin. This just goes to show just how well crypto has performed within the marketplace over the past 48 months.

Cryptocurrencies And Cheaper Services

Despite the fact that digital assets are still in their growth and development stages, they hold an impressive potential. Already, nearly 16% of people around the globe use cryptocurrency as a means of transferring value to others – far greater than the percentage of people who use checks, the percentage of people who use money orders, or the percentage of people who conduct wire transfers. 

Trading In Crypto

While cryptocurrencies are experiencing increased use as a payment system they are experiencing increased use at a vehicle of trading and speculation as well. Many investors now include cryptocurrencies in their investment portfolios to help mitigate risks and boost diversification. In 2017, there were around 35 million cryptocurrency exchange accounts globally. Just one year later, the number had increased almost 50% to 52 million. To meet the growing demand for cryptocurrency speculation, traditional online brokers and financial service providers have started to render flexible and customizable trading services for cryptocurrencies with minimal fees attached.

Cutting Out The Middleman

Cryptocurrencies are unique in their ability to facilitate value exchange between two parties in a permissionless, decentralized fashion. Computer nodes are responsible for processing transactions and recording them in the blockchain in an immutable code-based ledger. 

Once a transaction is verified, the transaction is assigned its own unique random “address”. Unlike centralized means of transferring value, records of cryptocurrency transactions do not leak or reveal any personal information. Therefore, cryptocurrency payment mechanisms allow for complete transparency while also perfectly safeguarding transactions. Furthermore, unlike traditional fiat currency payment options, the lack of an intermediary’s involvement reduces costs.

Facilitation Of Cashless Transactions

Digital assets facilitate cashless transactions in a decentralized manner. This alters international trading at its core; the US dollar is no longer a necessary medium of exchanging value internationally. Nations that face challenges related to international economic sanctions, therefore, may find value in using cryptocurrencies as a means of permissionless transfer. Not all countries have yet embraced and adopted cryptocurrency payment mechanisms but many believe it is only a matter of time before a vast majority of nations develop internal infrastructure in the space.

Are Fiat Alternatives Really Needed Today?

Although cryptocurrencies offer immense efficiency, a number of countries remain apprehensive about cryptocurrencies replacing their traditional bank notes as such a development would result in less effective central banking.

With more than 40 million crypto users around the globe today, though, it isn’t hard to see why it has been estimated that there could be 200 million blockchain wallet users within the next 10 years. 

Early Adoption Of Blockchain Technology 

Kane Kalas is an early adopter of blockchain technology and Bitcoin. He believes that currently, the most notable use case of digital assets, are their adoption as stores of value. Although most people within the cryptocurrency sphere think that gold and Bitcoin complement each other, it is Kalas’ long-held belief that Bitcoin could potentially destabilize gold. Kalas has stated:

“When Bitcoin first came to my attention in 2012, each coin was worth $5. I didn’t buy Bitcoin at that time because I was worried that it could easily be replaced by a superior cryptocurrency, but nevertheless, I did sell all my gold. I haven’t owned any since. Eventually, I believe blockchain technology will render gold completely useless as a value store.”

He has posited the simile that Bitcoin will soon be to gold what Netflix has become to Blockbuster. He notes, among other advantages, that Bitcoin has superior scarcity, divisibility, portability, noncounterfietability, storability, and fungibility relative to gold.

When Will Crypto Overtake Global Payment Systems?

While Kalas believes digital assets are well positioned to dominate the store-of-value market, unlike some cryptocurrency bulls, he does not believe that they will replace modern global payment systems any time soon. Kalas has stated that the costs of maintaining enormous immutable ledgers of microtransactions are simply too high for cryptocurrency to possibly destabilize fiat currency or even electronic fiat currency payment systems, such as credit cards and PayPal, in the coming one-to-two decades.


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