Why Are Digital Currencies The Next Paradigm Shift for Money?
It is really necessary to hold a bank account to manage and spend money? It is really not necessary anymore with the latest developments in blockchain technology and cryptocurrencies. And why should bank clients continue to pay for fees and other charges when the money that they have deposited in the bank works as the gas for banks to earn money?
At the moment, it is clearly useful to have electronic money. It is used at all times. We pay for bills, purchases and more with it. And it would be very uncomfortable to come back to cash systems.
About it, Jesse Lund, VP Blockchain and Digital Currencies at IBM, wrote an article in which he talks about these issues and what to do in the future with the evolution of money. He says that it is important to start discussing seriously on the future of virtual currencies, central banks and stable coins.
According to Mr. Lund, every single day, banks lose part of their market share to Fintech companies. If banks do not plan their business strategy for the future, they will have a difficult and tough road ahead.
There are new cryptocurrencies with better capabilities and systems that are able to disrupt the industry. Cryptocurrencies evolved and are disrupting the way in which value is stored and transacted, eliminating intermediaries in this process. It is a new way of thinking compared to banks.
In its effort to improve payments, the EU Payment Services Directive (PSD2) is working in order to allow non-bank entities such as online retailers, to initiate and complete payment transfers without using legacy payment networks or other proprietary bank systems. This is quite important. The European Union is working in order to improve payments and erode even more the payment market share that banks currently have.
Lund says that national digital currencies would be able to improve the market. In Sweden, for example, Riskbank announced that it is working in order to create a national virtual currency. This would allow competition among actors and enhance the national payment system.
There are other countries such as Canada, Norway, the United Kingdom and Ukraine that are also investigating the possible effects of a central bank digital currency (CBDC). These would offer operational efficiencies to banks and an improved user experience. Furthermore, it will also allow banks to inject liquidity and create revenue streams for themselves in the process.
In the end, blocking and national digital currencies could be the solution that banks are currently searching for. Lund explains that the first product that is brought to the market in that portfolio is World Wire, a new blockchain-based real-time cross-border payment network. IBM’s leadership in blockchain technology will help provide the solutions that institutions need to improve their services and innovate in cross-border payments.
Jesse Lund will be present in October at the Sibos conference that will take place in Sydney. He will be talking during the panel, ‘National digital currencies: Will they cash in?’