There are various views as regards the adoption of a digital asset in a country’s economy. And from these views, benefits and disadvantages have been cited. Just as some countries do not give in to the idea of creating a centralized ledger whereby illicit transaction occurs as a result of the technology. Some would argue the fact that digital is beneficial to their countries economy and contributes to their financial stability.
Digital asset poses no threat to the stability of a countries finance. Instead, it has been said to be a positive impact on an economy, serving as a hedge against bad government policies, and useful economic functions.
What are Digital Assets
A digital asset is a media or text that is formatted into a binary source and includes right-to-use features. The right-to-use feature is what makes the digital file a digital asset. So when a digital file doesn’t come with a right to use, it’s not a digital asset. A digital asset is majorly categorized into media assets and textual content.
A digital asset is increasingly becoming more important in the world of asset management. It’s no news that corporations like Microsoft and Apple are providing management features of a digital asset. These assets keep on existing notwithstanding where or when it was created, even as technology continues to progress.
A digital asset can be owned by individuals and can be used as a currency for transaction purposes and storing intangible contents, like videos or documents. Examples of digital assets are Cryptocurrencies such as non-fungible tokens(NFTs) which is a certificate of ownership for original digital content, bitcoins, and the likes.
Digital assets are securely held in a decentralized database or a centralized ledger called the blockchain. This decentralized database allows for the transfer of digital assets without the need for bank, broker, third party involvement, hence scraping the intermediaries to transactions.
Digital asset has significantly grown in importance over the years, but there is an argument as to their effect on the financial stability of a country and causing economic issues. The majority of individuals believe investment in digital assets and adopting payment methods is an innovation that shifts the financial sector of an economy and facilitates the smooth transaction between businesses and individuals.
So what are the effects digital assets have on the financial stability of countries economies;
Digital assets possess importance to the improvement of a nation's economy, increasing the financial stability of the country through reducing the cost of transfers, making transactions faster, creating new market opportunities between countries, offering high security for financial transactions.
With the rapid advancement in technology across the financial sector, digital assets have majorly hacked the benefits of this innovation, entering into the mainstream of finance, thereby contributing to the stability of countries economies.
Low transfer fees, high security, rapid transactions, and new market opportunities are among the main benefits of using digital assets for businesses. Bitcoin brought about some major positive growth in the digital asset ecosystem since its creation in 2009 and has enabled a wide range of tokens.
Although digital assets aren't regulated as a result of their decentralized database, it still maintains as a highly secure method of payment. Using digital assets as a means of payment is generally becoming a major method among individuals. There are many benefits digital asset offers to business and countries.
Most businesses and countries undergo transactions in their hundreds and thousands weekly and some daily. A digital asset can aid countries in minimizing transactions costs during intra country trade and international trade. Saving the government lot of costs incurred during transactions. It is paramount to know that cost of transactions can be as low as possible when using a digital asset for transactions. Amount saved while using a digital asset for a transaction depends on a variety of factors that occurs, some of which are processing fee, which must be checked regularly.
Processing fees are costs incurred when you send and receive digital assets through third-party platforms like Binance, Coinbase, and others. It's part of their terms of the agreement, one has no option but to accept the processing cost. So it's important to check the processing fee, so you can select a party that suits your needs. When Countries involve themselves in international trade with another country using a digital asset as a means of payment, it helps the economy by reducing unnecessary fees that are incurred when the traditional method is being used.
A major effect the use of digital assets has on the financial stability of a country is its feature of security. Instead of paying a high fee to perform a secured transaction. The transparent public ledger the digital asset is recorded in makes it possible for easy tracking of transactions and to perform audit trails.
Transaction performed using digital asset are irreversible once it has been done, and it can not be tampered with or hacked. This saves countries from the high occurrence of stolen funds. These assets are majorly controlled by the owner and are securely protected by the technology called Blockchain, shielding your asset from stealings and hackers.
Rapid Transaction Process
Delay in the transaction process can be quite devastating, especially when it is inter-country transactions. Sometimes most governments incur more costs just to put forth their trade. Digital asset transactions are very fast and still offer you control over the process. You can get any transaction approved and choose what transaction to initiate. This helps to reduce waiting time during transactions between businesses and countries.
New Market Opportunities
When a digital asset is introduced into a country or business, it enables the establishment of a new market. Using digital assets helps get in business with individuals who are also owners of digital assets, thereby widening the market opportunities. This gives a competitive advantage over other countries and businesses. And increases the financial capacity of the country.
Before venturing into the use of digital assets for transactions, it's important to take into consideration the volatility of a digital asset. This means that the price of the digital asset can rise and fall. That aside, the effect of digital assets on the financial stability of most countries is advantageous. It gives a competitive advantage to countries and increases their financial capacity.