Citi: Central Bank Digital Currencies – How Will the Future Unfold
CBDC will crowd out cash – Deutsche Bank
The advent of digital currencies will disrupt traditional banking
Ultimately, cash will disappear from circulation
Governments must partner with local digital giants to avoid being held hostage
Germany’s largest financial conglomerate predicts the end of the cash era due to central bank digital currencies
Physical money in the long term will be completely out of circulation due to the development of digital currencies. This is the opinion of the German financial giant Deutsche Bank. In the latest report, bank experts note the growing trend towards the development of digital currencies of central banks amid global lockdowns and social distancing measures.
“To meet the realities, companies and politicians must develop alternatives to credit cards and remove commission intermediation,” write Deutsche Bank.
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The German bank notes that at the current stage, regional digital payment systems should be the priority, and not international payments. With the further development of digital technology, Deutsche Bank expects physical banknotes to disappear.
“In the long term, digital currencies of central banks will replace cash,” the bank writes.
Hostage of the situation
While the pandemic has accelerated the need for digital money, more importantly, the crisis has exposed countries lagging behind in creating their own digital currencies. According to Deutsche Bank, large corporations of countries that drop out of the race will be forced to use digital currencies and the policies of other states..
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For a “painless” transition to digital money, governments and regulators must partner with local large companies targeting consumers. Deutsche Bank cites Swish, Alipay and WeChat Pay as an example, which are in great demand in China..
Deustche Bank also believes that digital currencies will help preserve capital in the face of negative interest rates in many developed countries, as well as rid the banking system of intermediaries. It is possible that people will prefer to keep their money directly at the central bank, rather than in banks with high fees, experts say..
“Obviously, this will disrupt traditional banking and affect financial stability,” admits Deustche Bank.
However, it is quite possible that in some countries intermediaries in the form of financial institutions will still remain. So, for example, the editorial staff of BeInCrypto reported that according to the international rating agency Moody’s, the indirect model of the digital ruble, in which the regulator will leave the role of intermediaries to commercial banks, may be the most optimal in Russian realities. In this case, Moody’s experts say, the owner of the digital ruble will be able to interact with a commercial bank, and not directly with the regulator..
About CBDC Paper bills and coins may be a thing of the past due to a new financial instrument – the digital currency of central banks (CBDC). As of … More and what the risks may be with this asset – read in the special material BeInCrypto.
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