By
Godfrey Benjamin
April 2nd, 2024
Deutsche Bank’s Jim Reid writes how cryptocurrencies will continue to gain acceptance in the global economy and ultimately dominate paper-money as we move towards a cashless society.
Cryptocurrencies continue to make strong inroads in the global economy as even the global governments and banks have started experimenting with crypto assets. In its latest report dubbed Imagine 2030, Deutsche Bank analyst Jim Reid said that cryptocurrencies will dominate and replace fiat currencies over the next decade.
With economic uncertainty brewing up all across the globe, Reid believes that government-backed fiat currencies won’t be sustainable. He said that there is a surge in demand for the dematerialized means of payment and additional anonymity in global trade and policies will escalate it further. Reid wrote:
“The forces that have held the current fiat system together now look fragile and they could unravel in the 2020s. If so, that will start to lead to a backlash against fiat money and demand for alternative currencies, such as gold or crypto could soar.”
Challenges ahead for Mainstream Adoption
One of the major reasons crypto adoption has slowed down recently is because of strict regulatory actions. Reid writes that for cryptocurrencies to be globally accepted in mainstream finance, they need to create legitimacy in the eyes of regulators and governments.
This will ensure some price stability by reducing extreme volatility and will ultimately lead to more adoption. He also says that forming alliances with major stakeholders like card providers and mobile payments apps will trigger this development.
But we know that every new development comes with its own set of challenges. Reid said that crypto-based financial systems will see major threats like digital war, electricity, and cyber attacks. “As that occurs, the line between cryptocurrencies, financial institutions, and public and private sectors may become blurred,” added Reid.
He said that governments and banks are aggressively pushing on a cashless society and reducing the overall dependency on paper-money. “While governments are more concerned with eliminating larger notes in circulation as they are mostly used for the black economy, banks and card providers are finding ways to foster smaller payments with cards through technology innovations, such as contactless and mobile payments,” he wrote.
He also pointed out the central bank digital currency (CBDC) projects under work by major global economies. We already know that China’s PBoC is already working on a Digital Yuan, while the U.S. is working on a Digital Dollar. Furthermore, the European Union is also collectively moving towards having a Digital Euro.
The ability to instantly settle millions of dollars in cross-border transactions is one of the major USPs of cryptocurrencies. It looks like governments have recognized their potential and working in the same direction. It will interesting to see how the global economy shapes ahead in the coming decade and the new developments that follow.