DB Research’s ‘The Future of Payments’ Says Fiat Paving Way For Cryptos But Not Swiftly

Of late, Blockchain as the technology and Cryptocurrency as the currency system (Digital Asset) have been the two most significant topics, and heavily discussed in numerous panels and satellite events, including at last week’s World Economic Forum (WEF) in Davos.

With sovereign governments and their central banks across the globe have been exploring the essence and the opportunities of CBDC (Central Bank Digital Currency) foreseeing a swift transformation phase in the prevailing finance system.

But for now, Germany’s banking giant, Deutsche Bank reckons ‘fiat money’ is unlikely to dematerialize in the near time even though the payment method has been changing as the remarkable surge in usage of cryptocurrencies.

The German renowned investment bank has recently anticipated that fiat currency will pave the way for the digital currencies adoption by 2030, now reconsiders that prevailing cash system would be sustained for a near future as a preferred method of payment.

As per their report titled the future of payments, they say that the concept of crypto assets have just been incepted a decade ago, it has also been witnessing gaining popularity and the potential to prosper further is indicating radical changes in payments, currency system, banking, central banking and the balance of economic power.

While they also highlighted the ECB President Christine Lagarde statement, “my personal conviction on the issue of stable coins is that we better be ahead of the curve. There is clearly demand out there that we have to respond to.”

“The Future of Payments” report is carried out by Deutsche Bank’s research arm which has 3 parts distinctively.

The first part “Cash: the Dinosaur Will Survive … For Now,” the report was issued on Jan 21st, subsequently, they released yet another research report “Moving to Digital Wallets and the Extinction of Plastic Cards,”was published on Jan 23rd, while the third part of the series, “Digital Currencies: the Ultimate Hard Power Tool,” has been issued on Jan 27th.

It is reckoned that the digital currency could become mainstream with the world’s one of the largest economies, China's digital yuan initiative and CBDC projects across various DMs are in the pipeline.

The report also noted that the digital currencies (at times also referred to as ‘digital money, electronic money or electronic currency’), either privately or publicly-issued, are a type of currency available in digital form, such as virtual currencies, cryptocurrencies and central bank digital currency (CBDC). Digital money can either be centralized, where there is a central point of control over the money supply, or decentralized, where the control over the money supply can come from various sources.

The above chart depicts the adoption rate of blockchain wallets as compared to the adoption rate of the Internet. At least for now, the curves are similar after adjusting for scale. If current trends continue, there could be two hundred billion blockchain wallet users by 2030.

The report also says the current adoption rates could, and likely will, change. If the Chinese government, along with Google, Amazon, Facebook, or Apple (the so-called GAFA group), or a Chinese company like Tencent can overcome some of the barriers to cryptocurrencies (discussed later), then cryptocurrencies could become more appealing. This will hasten their adoption and give them the potential to replace cash.

The basic technology backing digital assets, Blockchain technology, is working very well and is finding numerous ways of application. We are seeing many successful projects pop-up, gaining attention not only from incumbent financial institutions but also established governments around the globe.

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