Hello friends,
The current year could be the year in which the dream of cryptocurrencies dies. This does not mean that cryptocurrencies will be completely extinct - far from it. However, all financial romantics, cheered by the rise of Bitcoin and other digital currencies over the past decade, are coming to wake up.
It is not that these currencies have no place in the future of money. The encrypted blockchain technology that supports them is extremely difficult for governments to control, so unlikely to ever eliminate them. In any case, cryptocurrencies have the role of geopolitical protection.
The so-called Bitcoin maximalists predict the day when their favorite currency will rise and go into the first league. They point to the "halving" of Bitcoin expected in May, as cryptocurrency consolidation occurs every fourth year this month. New ones are emerging, half of the old ones are disappearing.
Yet, the long-term prospect of cryptocurrencies similar to Bitcoin are not a threat to the financial system.
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THREATS TO THE FINANCIAL SYSTEM COMING FROM CORPORATIONS
More importantly, a much bigger threat to the existing system is already present - as evidenced by Facebook's attempts to launch the digital currency Libra. JP Morgan has already launched a JPM coin for large institutional clients, while numerous other major banks have followed the examples. Rumors are circulating that other tech giants like Amazon, Google and Apple are also launching rival currencies.
Their model is what is known as stablecoins (stable money) - a type of crypto hybrid that lives on the blockchain but is pegged to major currencies. These multinationals want their sovereign money. They want to opt out of the cumbersome system they were forced to work in, with transaction fees and international payment delays, to instead present customers with a compelling alternative.
The reason why these companies do not invest in Bitcoin and other cryptocurrencies is obvious. Their values are too variable to play the role of value stock or to be used in the trade of goods and services.
Corporations have realized that the financial system is choking them and they want to create a new system without intermediaries, ie banks, which will be more reactive and cheaper.
COUNTRIES WAKE UP TO THE BANK INSPIRATION
States woke up late to this challenge, but now they have done so in a powerful and surprising way. Traditional global infrastructure has proven strong enough to keep corporations at least temporarily out of the rut. However, the rules have changed completely and it will be difficult to present a united regulatory front worldwide. It is ironic that the same lack of global unified regulatory approval for existing cryptocurrencies has limited their meaningful adoption.
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Another answer being examined is the launch of state-owned cryptocurrencies. China and Russia are likely to be in the lead for launching the country's first cryptocurrencies, within a few years. Deutsche Bank recently released a report suggesting that cryptocurrencies could outpace national currencies within ten years, predicting that these government-backed versions will be leading.
In short, the future of cryptocurrency lies in corporate or government digital coins - or more likely, in the uneasy coexistence of both. A system that would allegedly be threatened by Bitcoin and other so-called bank killers instead assimilates them. Emerging cryptocurrencies may not even use blockchain, behaving more closely to Paypal or WeChat Pay than to cryptocurrencies as we know it today.
Where corporations have grown in size and influence comparable to nation-states in the past half-century, the next half-century could produce a new paradigm in which they will increasingly behave like nation-states. When we think about the way these corporations already manage our data, the way they lobby our governments, the trend is obviously ongoing.
Money in 2030 is likely to be almost unrecognizable in relation to what we use today. The dream of universal money-driven cash substitutes has come crashing down due to this unexpected but inevitable institutionalization. It is about to emerge from the multinational world that sitting Bitcoin - wrapped in corporate branding, if not sovereign flags - will come.
Thanks and have a great time.
Posted via Steemleo