Advancing towards properties in digital currencies have many benefits. But, it should also serve as a backdrop to talking about such cons. Just like every other financial innovation, digital currencies also have some of their own disadvantages which can prove detrimental for individuals and societies at large.
Increased security does not leave digital currency unaffected. Digital wallets and exchanges have been hacked several times, and millions of dollars’ worth of assets have gone missing as a result. To an individual, this may mean that their own savings might be at risk if they do not take adequate precautions in securing their digital wallets.
Increased possible financial instability is really another disadvantage. Digital currencies are very volatile and experience wild swings of prices in very short time periods. This made them very risky investments, and if these currencies had begun to be used as payment in large-scale economy, instability of economy would be an inevitable outcome.
Another concern is privacy. Digital currencies are more transparent in some ways; on the other hand, governments and other institutions can track financial exchanges much easier. This would mean, probably, loss of privacy of individuals or even infringement of their rights.
Digital currency inequality could be a future possibility; it doesn’t necessarily consider that allegedly they will help financial inclusion but will be of value with technology access as well financial literacy, which is not all the cases with the group of people. This leaves even more marginal communities backwards.
And then, there’s regulation. Digital currencies are still straddling the fence in most countries as concerns legality. Thus, it becomes hard for a government to use its controlling powers over such currencies. Actually, it may lead to more criminal acts in terms of money laundering or tax evasion.
Of course, benefits have been proposed by the advantages of digital currencies.