Tether and other stablecoins may truly be given a run for their money if Central Bank Digital Currencies actually make any traction in the years ahead. This prospect seems more and more likely, with banks like the People’s Bank of China and others announcing progress on existing projects along exactly these lines. Other banks need merely to follow suit.
World Economic Forum
The World Economic Forum has reportedly published a framework to help central banks get started in the exciting world of digital currencies. The WEF is a global non-profit committed to certain social goals. It has an interest in blockchain technology. Its Head of Blockchain and Distributed Ledger Technology reportedly said:
Given the critical roles central banks play in the global economy, any central bank digital currency implementation, including potentially with blockchain technology, will have a profound impact domestically and internationally. It is imperative that central banks proceed cautiously, with a rigorous analysis of the opportunities and challenges posed.
If the future is a cashless society, central banks will have to do their part to make it possible. Currently, card transaction fees, which are the lifeblood of some financial companies, make things like microtransactions impossible. While you can do them, you have to pay a minimum fee on every transaction. That makes small transactions, like under $1, a waste for both sides.
Digital currency could change all that. If people got used to a new norm, where they pay with their phones instead of things from their wallet, even banks would benefit from the new system.
The question is what format these new digital currency layers will take.
Phone Payments and Digital Banking
Will they be blockchain tokens? Tokens on existing blockchains, like Ethereum? Or will they simply be digital currencies? It’s hard to tell.
What will likely happen is each country will roll out its digital currency project after learning from the mistakes of others. This might be why the US and other western countries are waiting to do it. Since some countries have already committed to launching digital currencies, the US can sit back and watch how that works out.
What’s yet unclear is how these new digital currencies will interact with existing digital currency exchanges. Will stablecoins suddenly become less interesting, with new options making a lot more sense? Only time will tell things like that.
What if central banks are the ones to introduce people to paying by phone, and then cryptocurrencies see adoption as a result? It’s possible people could like the experience enough to try it out with another currency, like Bitcoin Cash or Monero.
Who knows what the future will bring, but it seems more and more likely that people will be paying by phone, with digital currencies of at least one type (the US dollar), and that banks will still play a role in all this. Moreover, banks will be crucial to it. You won’t just have an app issued by the Federal Reserve; instead, your bank will have an app that allows you to interact with the digital version of the dollar.
Whatever happens, that things are going increasingly digital seems inarguably clear.