As central banks face dismal economic forecasts that show the global economy contracting by 3% in 2020, far worse than during the 2008–09 financial crisis, the adoption of technologies that can drive efficiency and optimize procedures is accelerating.
According to Darrell Duffie, professor of finance at Stanford Business School, digital currencies, which are programmable, cryptographically secure and easily transferred across borders, will continue to prove their advantages over fiat currencies and paper-based systems.
In a video clip entitled “Digital Currency Is Going Mainstream”, Duffie says it’s not necessary for the banks to lead the way.
“Why would the banks disrupt themselves by introducing a digital currency that would make it easier for consumers and businesses to disintermediate the banks? Well, the banks may not be the innovators. It may be that they are the reactors, that they will react when others innovate.
But I’m sure that they considered the trade-offs involved in whether to disrupt themselves by introducing digital currencies, or whether to weigh and react when others introduce digital currencies.”
Eleven years after the release of Bitcoin, digital assets are still trying to shed its critics. Nearly two years ago, in a July 2018 interview with Swiss-German news outlet Basler Zeitung, Agustín Carstens, the general manager of the Bank for International Settlements, implored young people to “stop trying to create money”, noting that “It’s a fallacy to think money can be created from nothing.”
Now that the coronavirus has ignited a new era of quantitative easing with trillions being created out of thin air, that argument has lost steam and developers in the crypto community are continuing to build products and platforms that can compete with, replace, supplement existing financial products and services or create entirely new options.
Duffie says the world has moved beyond characterizing digital currency as an alternative movement.
“It’s becoming the mainstream and so the banks, the largest banks in particular, are very aware of this. They’re investing in the technology, and they will provide this service as soon as it’s profitable enough, after considering the costs to them of losing some of their current business that they’re going to disrupt.
Banks will eventually either be leading or following but they’ll be involved. They can’t avoid it.”
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