With the current level of technology, the world of finance is rapidly adjusting to the trend, moving from localized fiat currencies to universal digital currencies.

With a global market cap of over $1.12 trillion, cryptocurrency is famed for its “currency beyond borders” attribute. It is capable of transacting millions worth of transactions without stress.

Recently, cryptocurrencies have been in the spotlight, driving massive attention from academia, businessmen and policymakers in various economies. Despite this attention, though many countries recognise these virtual coins but do not accept them as legal tender.

For reference, legal tender is a medium of exchange established by statute and recognized by the Central Bank of an economy for settling debts hence making its acceptance mandatory for the same purpose when offered.

But why?

Various reasons drive the rigidity in the acceptance of cryptocurrency by Central Banks and they include;

a) Standard Empirical Regulatory Framework

One of the main reasons for the rigidity in accepting cryptocurrency as a legal tender is the lack of a standard empirical regulatory framework. Traditional currencies such as the United States Dollars, the Kingdom of Saudi Arabia Riyal and the Nigerian Naira are issued and legally backed by their respective central banks. This gives the currencies a high level of integrity, stability and security.

On the other hand, cryptocurrencies operate in a highly unregulated cyberspace opening every transaction to various risks such as scams and frauds. The lack of a standard framework and regulation to prevent these cyberrisks contributed to the rigidity of acceptance because they raise concerns about consumer protection and financial stability.

b) Volatility and Stability

Cryptocurrencies such as Bitcoin, Ethereum, and Shiba Inu are highly unstable in value due to their frequent and rapid value fluctuation. For investors, the volatility characteristics of cryptocurrency are a gold mine but to those desiring to hold it as a medium of exchange.

Due to the uncertainty of its value at any point in time, businesses and individuals do not prefer it to other media of exchange.

c) Security Concerns

When it comes to fiat currencies, security is a major concern. Likewise, security is also a major concern when it comes to cryptocurrencies. The cryptocurrency space is very vulnerable to hacking, fraud and cyber-attacks putting users' assets at risk. The popular Mt. Gox is a piece of evidence establishing the cause of this concern when thousands of Bitcoins were lost by a major cryptocurrency exchange company.

Adopting cryptocurrency as a legal tender means that the Central Banks would set up strong security measures for cryptocurrency service providers, conduct regular audits, and implement safeguards against vulnerabilities in the cryptocurrency infrastructure.

d) Global Standards

Cryptocurrencies operate on a global scale, transcending national boundaries. However, the lack of standardized international regulations and standards for cryptocurrencies creates challenges for governments looking to integrate them into their financial systems. Coordinating with other nations and international bodies to establish consistent guidelines for the use of cryptocurrencies is a complex and ongoing process

On a final note…

Without any doubt, the future of finance lies in cryptocurrencies and the future is here. Global economies have recognized the comprehensiveness and importance of virtual currencies.

However, the adoption of cryptocurrency as legal tender is a complex and multifaceted process that involves serious and rigorous inquiry into the regulatory, economic, and technological challenges. While cryptocurrencies offer many financial advantages, they also bring unique risks and uncertainties. Researchers worldwide are conducting studies, piloting projects, and cautiously considering the implications of this major financial transition. The path to cryptocurrency adoption is bombarded with obstacles, but as the digital financial landscape continues to evolve, governments will need to address these challenges to fully embrace the potential benefits of cryptocurrencies as legal tender. Whether they can overcome these complexities and successfully integrate cryptocurrencies into their financial systems will shape the future of money and commerce on a global scale.