Darryn Pollock* wonders when cryptocurrencies will take centre-stage globally and usurp the role of cash.
As the past decade was rounded out a month ago, it was interesting to see how far finance and technology had come.
We did not even have 4G and the iPad was still just an idea.
But, interestingly, we did have Bitcoin at the turn of the last decade.
Finance and payments are an ever-changing space.
We have seen golden gallons and pieces of silver replaced by paper notes and then plastic cards.
The age of digital has certainly helped speed along the way we use and understand money.
We also now sit on the precipice of another financial revolution tied to the fourth Industrial Revolution.
Blockchain, artificial intelligence (AI), the Internet of Things (IoT), and a bevvy of other technologies are starting to permeate our lives, and the older, traditional models and technologies are looking to try to keep up, or falling away.
With this boom in technology is the emergence of cryptocurrencies.
Cryptocurrencies, despite being older than the iPad, have only really permeated the mainstream space in the past three or four years, but their impact is quickly being felt.
The growth in interest in digital currencies has expanded into many banks; into major enterprises, and even Government Agencies.
The question that is cropping up more and more though, is when will cryptocurrencies take centre-stage and usurp cash, which is already being seen as obsolete in places such as Sweden.
One bank that has a strong interest in staying relevant after massive job cuts is Deutsche Bank.
The bank, in its look towards 2030, has predicted that in the coming 10 years, the current fiat financial system could grind to a halt, leaving the stage open for something new — something like cryptocurrency.
The end of cash?
The Deutsche Bank report on the future of finance in the coming decade spends significant time looking at the prospect of cryptocurrencies.
It notes that this industry has long been seen as an addition, rather than a substitution, to the global inventory of money, but this can change based on the future of cash — and cards.
Cryptocurrencies have not managed to take off as a means of payment despite their well-known benefits, according to the report, such as security, speed, minimal transaction fees, ease of storage and relevance in the digital era.
So, while cash sits in a precarious place for the coming 10 years, and this is to the benefit of cryptocurrencies, there are still some key issues that need to be overcome if cryptocurrency is to replace the current cash status quo.
“Cryptocurrencies need to overcome three main hurdles to become widespread,” the report says.
“First, they must become legitimate in the eyes of governments and regulators.”
“That means bringing stability to the price and bringing advantages to both merchants and consumers.”
“They must also allow for global reach in the payment market.”
“To do this, alliances must be forged with key stakeholders — mobile apps such as Apple Pay, Google Pay, card providers such as Visa and Mastercard, and retailers.”
Of course, some of this is already in the works.
However, it is not as simple as getting past those three hurdles; according to the bank, there would also be new challenges that would arise with the future popularisation of cryptocurrency and the fall of cash.
“If these challenges can be overcome, the eventual future of cash is at risk,” the report says.
“But new challenges would arise.”
“For starters, it will mean basing a robust financial system entirely on electricity consumption.”
“To envision a smooth transmission towards a fully digitalised platform, the financial system needs to be ready to overcome any kind of electricity shutdown or cyberattack.”
“Governments may increasingly need to safely store backup of citizens’ data in an alternative country.”
“Estonia, for example, chose Luxembourg to store a comprehensive backup of Government data, including details of its citizens’ health, population, business registries, as well as a data embassy.”
Growth of CBDCs
The future of cryptocurrencies may not even rest with what we know now, in 2020.
There has been an explosion in interest over the potential of central banks issuing their own cryptocurrencies — called Central Bank Digital Currencies (CBDCs).
Many, especially in government, feel that these tick the boxes of being both regulated and controlled, but can still offer the benefits of a new digital age.
In fact, at the recently concluded World Economic Forum in Davos, a new policy toolkit was unveiled for the growth of these CBDCs.
Central banks on the magnitude of England understand that if governance can be acquired and standardised, the doors can really open on these digital currencies.
“Governance is the core pillar of any form of digital currency,” said Mark Carney, Governor of the Bank of England.
“It is critical that any framework on digital currencies ensures security, efficiency and legitimacy of payments while ensuring fair and open competition.”
“We welcome the World Economic Forum’s platform to help develop a robust governance framework for inclusion through digital currencies.”
* Darryn Pollock is a cryptocurrency journalist contributing to Forbes Crypto. He tweets at @DJPolly216.
This article first appeared at www.forbes.com.
