A bank without crypto will not survive
According to Alex Axelrod in Cointelegraph, the global monetary landscape is changing so dramatically that all banks will need to store cryptocurrencies, CBDCs and electronic money if they want to survive.
He asks us to imagine the inconvenience of having to use a range of different messenger apps just to communicate and then points out that this is exactly what is happening today in finance. We are unable to “send both digital fiat money and cryptocurrency from a bank account without extra steps.” At the moment you may think, well this doesn’t really affect me, but in the near future it certainly will. So, now is the time to start some streamlining and ensure fiat and crypto can live side-by-side.
Banks can no longer afford to ignore digital assets, especially as the Cambridge Centre for Alternative Finance discovered that the number of cryptocurrency users has almost tripled from 35 million people in 2018 to 101 million people in Q3 2020. And the UK’s FCA says it has seen a 78% uptick in user numbers since 2019.
PayPal shows profitability of crypto
PayPal is one financial payments provider that has discovered the profitability of cryptocurrencies. Since it introduced crypto transactions in Q3 2020, it saw transactions rise by 36%, worth some $277 billion. It is one of the best quarterly returns in PayPal’s history.
CBDCs will need new banking infrastructure
Furthermore, central bank digital currencies (CBDCs) are going to become a part of our daily lives in three to five years. This requires a new financial infrastructure if they are to achieve mainstream adoption. China is already promoting its digital yuan and testing it in various cities. Axelrod says, “China is fully focused on the infrastructure because several local banks have already developed or are developing their own e-wallets — the main tool for working with DCEP.” Currently there are around 60 central banks worldwide working on CBDCs, so it is definitely coming. Moreover, the new technology needed to manage CBDCs will “make it possible to gain full control over all financial transactions, ensures social spending targeting, increases tax collection, and prevents financial crimes.”
What is needed is a multi-format financial solution, and Axelrod says, “People who aren’t deeply involved in crypto might think digital assets cannot be integrated into traditional business processes. But this is untrue.”
A new era of financial diversity
In this new era, we are going to see a lot of different types of financial intermediaries emerge, each finding their own niche. Furthermore, they will combine “different types of electronic money, CBDCs and cryptocurrencies, using a variety of services,” something that Visa already does by supporting fiat, crypto, precious metals and Bitcoin cashback.
In the end, the financial institutions that will survive are the ones able to provide different types of money/currencies/payment systems — just as Creditum aims to do.