The last 12 months have been a rollercoaster ride for digital currencies and their holders. Countless millionaires have been made, and these once-niche instruments have finally been welcomed into the fold by institutional investors. Understandably, the spotlight has been firmly focused on legacy assets like Bitcoin, Ethereum and Litecoin. But beyond the explosive growth of these well-known coins, there are even more momentous developments taking place in the crypto space. As demand for digital assets skyrockets from Wall Street to Main Street, global central banks are now looking to get in on the action, too.
There has been serious talk of Central Bank Digital Currencies (CBDCs) for nearly 3 years now, and virtually all of the world’s major regulators had been working towards launching their own versions with varying levels of zeal. Then came COVID-19, prompting a rapid acceleration of implementation efforts.
Unsurprisingly, China is by far the most advanced CBDC project at present, having already run real-life tests of a range of digital currency electronic payment (DCEP) solutions in 2020. But China is not alone; early 2020 also saw the establishment of a cross-border working group representing five global reserve currencies (CAD, EUR, JPY, CHF and GBP) plus SEK.
Not to be outdone by his counterparts around the world, Federal Reserve Chairman Jerome Powell made some uncharacteristically revealing comments about the United States’ CBDC project at a recent Congressional hearing. Powell went as far as to confirm that the Fed would aim to engage with the public on the digital dollar this year (2021), adding that it was up to Congress to give the US regulator the “legislative authorisation” for the project. The Fed chair made clear that the new CBDC would not be used to manipulate markets, underscoring the need to take great care with the design of the digital dollar to ensure that it doesn’t undermine the healthy functioning of the US financial system.
We have to face the facts that the call for digital alternatives to traditional fiat currencies is only likely to grow louder in the future as millennials and Gen Z begin to edge out older generations. The writing is on the wall: younger financial actors — with their ingrained culture of instant gratification — are simply not willing to wait several days for a payment to clear. What’s more, it gives disadvantaged, unbanked persons easier and safer access to money and can help fight the illegal activity that often goes hand in hand with digital currencies.
But it isn’t just consumers who stand to benefit. As the IMF reports, the cost of managing and transferring cash is high, and CBDC technology can slash expenses while also accelerating the implementation of central bank monetary policy.
Whatever we might think, central banks and sovereign issuers are not a total monopoly. Indeed, payment systems’ inefficiencies have prompted the rise of numerous fintech/BaaS providers such as Square and Adyen to fill the void left by existing infrastructure. Moreover, CBDCs themselves already have competition in privately issued stablecoins like Tether and potentially Libra. As Fed Governor Lael Brainard put it: “the introduction of Bitcoin and the subsequent emergence of stablecoins with potentially global reach have raised fundamental questions about legal and regulatory safeguards, financial stability, and the role of currency in society”.
As such, these latest CBDC policy initiatives are absolutely necessary if central banks are to retain control over their own currencies in the crypto age.
The only question that remains is whether these new currencies will be backed by anything. It’s plain to see that people’s confidence in fiat is waning as more and more wonder how long ever-lower interest rates and MMT can hold out. Many analysts have touted Bitcoin as a potential new “digital gold standard” for the global financial system of tomorrow. If this is true, we would need to see another massive increase in BTC’s value that would dwarf the booms of 2018 and 2020. Nobody knows what will ultimately come to pass, but one thing’s for sure: if Bitcoin is to become the global reserve, we could be in for a 10, 20 or even 30x moonshot in the years ahead!
|#||Crypto||Prediction||Accuracy||CVIX||Price||24h||7d||Market Cap||7d price change|
|1||BTC||Bitcoin predictions||75.2%||50||$48 706.73||-9.26%||-10.81%||$920 132 432 479|
|2||ETH||Ethereum predictions||82.4%||33||$4 059.61||-3.80%||-0.61%||$481 495 723 238|
|3||BNB||Binance Coin predictions||82%||32||$562.06||-5.77%||-6.99%||$93 752 606 143|
|4||USDT||Tether predictions||94%||1||$0.999843||-0.04%||-0.10%||$74 146 017 092|
|5||SOL||Solana predictions||69.2%||62||$200.85||-6.55%||3.29%||$61 387 860 524|
|6||ADA||Cardano predictions||64.8%||72||$1.41||-10.52%||-9.18%||$46 958 385 031|
|7||USDC||USD Coin predictions||95.6%||2||$0.999385||-0.03%||-0.05%||$39 796 534 169|
|8||XRP||XRP predictions||65.6%||70||$0.834001||-10.39%||-11.92%||$39 404 303 399|
|9||DOT||Polkadot predictions||62.8%||76||$29.08||-14.58%||-17.21%||$28 721 201 555|
|10||LUNA||Terra predictions||66.8%||65||$71.05||5.47%||63.77%||$27 565 404 822|
|11||DOGE||Dogecoin predictions||66%||74||$0.175319||-12.61%||-14.55%||$23 209 784 837|
|12||AVAX||Avalanche predictions||64.8%||73||$90.70||-14.60%||-19.51%||$22 013 847 272|
|13||SHIB||SHIBA INU predictions||64.8%||73||$0.000037||-9.62%||-5.62%||$20 243 352 002|
|14||CRO||Crypto.com Chain predictions||57.6%||86||$0.595382||-5.97%||-25.47%||$15 041 152 356|
|15||BUSD||Binance USD predictions||96%||1||$0.999915||0.09%||-0.01%||$13 732 244 013|
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