Digital Currency Revolution Series: Every Cloud Has A Silver Lining, Crypto Cloud No Exception

As saying goes nothing is permanent is this universe, except change. Change being the only constant, we’ve seen many evolution and revolutions in all walks of our lives. From the last 3-4 centuries, our medium of exchange has also seen paradigm shift in our societies. We all know that the transformation in the global currency system has brought us ease doing business, as it has evolved from barter to electronic payment systems.

Well, in this decade, we are witnessing many indications of a remarkable shift in the global currency dynamics. Various currency mechanisms like devaluation, IMF naming Chinese renminbi as the world reserve currency was surprising, while joining only the dollar, euro, pound and yen in this elite rank opens the door to wider use of the renminbi in trade and finance.

But most interestingly, crypto-adoption, stable-coins, CBDC (Central Bank Digital Currency) and tokenization are striking the chord among the financial communities. 

European Central Bank (ECB) has divulged in the recent past as well that it intends to accelerate its plans for a central bank digital currency (CBDC) upon consumers’ discomfort in cash transactions.

As per the latest report by the renowned Germany’s banking giant, ‘Deutsche Bank’, the digital currencies driven by the robust underlying technology blockchain are most likely to replace cash payments within the next decade or so. 

The report highlights that the current fiat currency system could be switched to cryptos, the fiat currencies pave the way to new alternatives.

In the report titled Image 2030: the decade ahead, the team of researchers led by Deutsche Bank’s Global Head of Fundamental Credit Strategy and Thematic Research, Jim Reid, makes several predictions about what the world might look like a decade from now.

He runs us through the evolution of currency system, prior to the early 1970s (when the Gold Standard was dropped) money was always backed by some type of commodity. In the last 50 years, however, money has been solely backed by trust. Today, the fiat currency system looks more endangered than ever.

“The demand for alternative currencies will therefore likely be significantly higher by the time 2030 rolls around. Will fiat currencies survive the policy dilemma that authorities will experience as they try to balance higher yields with record levels of debt? That’s the multi-trillion-dollar question for the decade ahead,” he concludes, hinting at bitcoin’s potential as an alternative currency.

While the Senior Economist Marion Laboure believes that once a regulatory framework is in place in key regions across the globe and the government-backed move towards cashless societies continues, cryptocurrencies have the potential to replace cash by 2030. 

The two most pivotal markets will be China and India, which have both taken a stringent stance on cryptocurrency trading. However, India is keen to move towards a cashless society to combat its black economy and China is planning to introduce a “blockchain based” version of the Yuan. 

Moreover, consumers (and businesses) are increasingly preferring digital over cash-based payments, which bodes well for crypto adoption as they do not come with high transaction fees (like bank cards) and provide a higher level of privacy than other digital payment methods. 

For cryptocurrencies to replace cash, three hurdles will need to be overcome, according to Laboure. The trios are: gaining legitimacy in the eyes of governments, building alliances with the broader payments industry, and requiring a robust digital financial system that can stem cyberattacks and other potential risks to a purely digital payments market. 

If at all these obstacles are addressed in satisfactory manner, then it is most likely transformation is the currency system in the next decade.