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- According to one expert, cryptocurrency as an asset class has actual staying potential
- The old method can process more transactions per second outside of cross-border payments
- Central banks will become the dominating player once they enter this market, decreasing costs and promoting financial inclusion
While digital currencies have made investing more accessible, cryptocurrencies, such as bitcoin, have yet to fully compete with established financial systems. According to one expert, cryptocurrency as an asset class has actual staying potential. But what about their long-term worth as a payment method? Jeroen van Oerle, head of fintech at Lombard Odier, disagreed.
Cryptocurrencies are now easily accessible
While digital currencies have made investing more accessible, cryptocurrencies, such as bitcoin, have yet to fully compete with established financial systems. According to one expert, cryptocurrency as an asset class has actual staying potential. But what about their long-term worth as a payment method? Jeroen van Oerle, head of fintech at Lombard Odier, disagreed.
Van Oerle believes that as govcoins, or central bank digital currencies (CBDCs), gain popularity, the payment coin category will struggle to thrive in a world where know-your-customer and anti-money-laundering regulations are already in place.
You’ll have to compete with central banks in the end, he told Arabian Business, because they’ll use this infrastructure to optimize cross-border transfers. Currently, the only value payment coins have, according to van Oerle, is for cross-border transactions that take a few days and are expensive. However, he believes that once central banks enter the market, they will become the dominant player by cutting costs and promoting financial inclusion.
It takes only a wallet, which can be with a traditional bank or with the central bank, to make it much easier for people to participate in digital payments, he said, adding that it’s an appealing option for central banks to pursue because financial inclusion is high on the agenda of regulators and central banks.
Central banks are now playing an active role in Digital Currencies
According to a Bank for International Settlements (BIS) report from January 2021, 65 central banks in advanced, emerging market, and developing nations were polled in 2020, with 86 percent stating that they were actively engaged in some type of CBDC activities.
According to the BIS analysis, central banks representing one-fifth of the world’s population are expected to issue a general purpose CBDC in the next three years, with 21% of jurisdictions indicating that this is a possibility. In the short or medium term, 60% of central banks said they are unlikely to issue any sort of CBDC. Venezuela, Estonia, Russia, Sweden, and Japan are among the countries that have developed their own cryptocurrency. Britcoin is the name given to the British CBDC.
China has already launched its own e-yuan, despite the government’s efforts to crack down on crypto trading and mining. Critics of CBDCs have claimed that their presence on the blockchain means the end of anonymity, but van Oerle countered that this isn’t necessarily true, pointing to a consensus mechanism that was developed in which individuals are grouped according to criterion, making it impossible to track down a single person.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
