Digital currencies could replace money within five years. This is even more likely to happen in smaller countries with smaller economies. Central Bank Digital Currencies (CBDC) would be excellent replacements for money. According to a research published on Tuesday by tech giant IBM and the Official Monetary and Financial Institutions Forum (OMFIF).
The study ‘Retail CBDCs: The next payments frontier’ involved banks from 13 advanced economies and 10 emerging markets. Most of the respondents are in favor of digital currencies. Central banks (82%) are a bit more positive than regular banks (73%).
Even though not every bank and central bank is convinced of digital currencies, most of them agree that CBDC should be available ‘under all circumstances’. The biggest fear of the banks is that they will be left behind or displaced by the rise of cryptocurrencies. However, just a bit more than half of the respondents was concerned about private challengers, like the Libra Foundation.
Interestingly central banks believe that a CBDC should be available online and offline as well. IBM and OMFIF expect the first CBDC to launch within give years. This digital currency can be a complement or a substitute for traditional money.
Offline digital currencies
The study from IBM and OMFIF reiterates some statements made earlier by other organizations. ING Bank stated recently that central banks will be using their own Central Bank Digital Currencies within three years. The whole reveal of Facebook’s libra project got lots of people within national governments and central banks thinking.
China seems to be ahead of the game. The People’s Bank of China claims to work on a national digital currency for 5 to 6 years already. According to the latest rumors their digital currency will also work offline. People can exchange money through NFC connections.
Smaller countries embracing crypto
Over the past twelve months we’ve seen countries like Malta, The Marshall Islands, San Marino, and Liechtenstein introduce all kinds of blockchain-powered initiatives. Malta is putting rental contracts, company registrations and much more on a blockchain. In addition The Marshall Islands introduced a cryptocurrency to use alongside the US dollar, while Liechtenstein approved The Blockchain Act.
At the same time bigger countries are left behind. The United States is too busy with the US dollar and trade embargoes, while Europe was just woken up by Facebook’s announcement of Libra. These political structures will take years to move away from their traditional money, and are at risk of falling behind. China – perhaps pressured by the trade embargoes from the US – already has a five year head start.
Also published on Medium.