DeutschA study commissioned by Crypto.com called “Digimentality 2021” examines the extent to which consumers trust digital payments and what obstacles exist for mass acceptance of cryptocurrencies. The study was conducted by the market research department of the Economist Group and compares consumer attitudes with a similar survey from 2020.
Study Conducted on Two Levels
The survey was conducted in February, March and April 2021 among 3,253 people – including 200 institutional investors and companies. About half of the respondents came from industrialized countries (USA, UK, France, South Korea, Australia and Singapore) and the other half from developing countries (Brazil, Turkey, Vietnam, South Africa and the Philippines). Various educational backgrounds are represented, with five out of ten respondents having a university or professional degree. All respondents had purchased a product or service with some type of digital payment in the past 12 months.
While the first part of the study focuses on usage and demand from a consumer perspective, the second part deals with usage and demand at the institutional and corporate level.
Increase in Digital Payments
According to the study, consumers increasingly prefer digital transactions:
- In the past 12 months, 27% of survey participants stated that they always used digital payments instead of physical banknotes, coins, or credit cards.
- Another 41% stated that they use digital payments for at least half of their purchases.
- Among the respondents, 42% stated that digital payments have increased overall compared to the previous year.
- Another piece of evidence for the last point: 12% of respondents stated that they rarely used digital payments in the past 12 months, which is a decrease compared to the 14% of the previous year.
The most common form of digital currency that consumers report using continues to be the open-source variant (cryptocurrencies like Bitcoin). This was followed by government-issued CBDCs and then digital currencies issued by a technology or financial company. Nothing has changed in this order of preference since last year. However, it should be noted that while announcements of new CBDCs have increased in recent months, actual public use is still extremely limited and is mainly in test phases.
Persistent Obstacles to Going Cashless
Habits with physical cash, lack of technological understanding, and privacy concerns remain the main factors that consumers cite as obstacles to their country going cashless. The main obstacles to greater acceptance are similar for the various types of digital currencies available, albeit with nuances:
- For open-source cryptocurrencies, according to survey participants, the main obstacle is a lack of knowledge (51%). This is followed by security concerns (34%) and difficulty in purchasing (29%).
- Greater acceptance of CBDCs is hindered by a lack of education (28%), technical knowledge (27%), and people who do not trust the security of the technology (25%) or have concerns about privacy (24%).
But the tide is turning: Nine percent of respondents in the 2021 survey say that the country in which they live is already cashless (defined as predominantly digital rather than physical payment methods).
CBDCs also in the Race for Digital Acceptance
Worldwide, the trend towards a cashless society continues and encompasses a variety of approaches, ranging from credit cards and payment apps to cryptocurrencies and central bank digital currencies (CBDCs). In China, the government has launched a large-scale CBDC pilot project with its digital national currency. These developments could accelerate the institutional adoption of digital assets.
Digital central bank money – how are states positioning themselves so far?
Almost eight out of ten (78%) of institutional and corporate survey participants say that the issuance of CBDCs is necessary to create a functioning market for new financial instruments such as digital bonds or other forms of digital assets that complement the role of cryptocurrencies.
A majority of respondents (59%) also believe that the establishment of CBDCs will increase overall demand for other forms of digital currencies and assets that are not backed by the government.
Cryptocurrencies for Portfolio Diversification
The change in the institutional landscape is happening quickly. The price increase of cryptocurrencies such as Bitcoin has sparked new interest from banks, financial services companies and corporate finance. The most well-known example is the electric car company Tesla, whose investment in Bitcoin in February 2021 earned more than $1 billion.
However, institutions and corporate treasuries seem divided on whether digital open-source currencies such as Bitcoin should be viewed strictly as a currency for settling transactions or as an asset: 34% view Bitcoin as a currency, 31% as an asset, and 27% as a combination of the two forms.
Goldman Sachs: Cryptocurrencies are a new asset class
According to survey participants, the most important roles of open-source currencies or investments in a portfolio or treasury account are capital appreciation (33%) and alternative asset diversification (31%). Hedging against inflation (28%) was also voted for among the top 5 options, while speculation (21%) is at the very bottom of the list, suggesting a maturity of the market. Despite the volatility, Bitcoin appears to be a popular hedge against inflation and currency devaluation.
A parallel of cryptocurrency as “digital gold”, which has similar patterns in terms of limited supply, the benefits of divisibility, and the function as a portfolio diversifier, is gaining increasing acceptance. However, concerns regarding regulation, trust and understanding remain.
Conclusion
Traditional financial markets and digital assets are no longer mutually exclusive. However, the main obstacles to greater acceptance were cited as general market confidence or understanding of digital currencies and assets, as well as financial market structures.
More than half (56%) of consumer respondents believe that CBDCs are likely to replace physical or fiat currencies in their country. For corporate organizations, digital currencies are on the radar – both as a transaction unit and as a store of value.
Consumers are increasingly adopting cashless payment methods, while countries are testing CBDCs and companies are experimenting with digital open-source solutions. The various digital currencies are seen as complementary rather than contradictory, meaning that one option may lead to another in the future.
The study: Digimentality Study by Economist and Crypto.com
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