The evolution of new technologies, financial innovations and the dramatic evolution of digital currencies is transforming the way we use money. We are in the process of a new form of finance that will use a range of technologies to change the way we use and manage one of our most fundamental tools: money.
Taking out cash from an ATM, applying for a mortgage by visiting a bank branch, or shopping in a department store are in the past. Conducting financial transactions of any kind is an online experience, escalated over the past two years by the COVID-19 pandemic. The future of money exists in the Ether, via phones and laptops.
Cryptocurrencies and faster, more powerful financial technologies are transforming our concept of money and challenging the financial institutions that currently manage it. The year 2021 was a transformative year for finance, and 2022 is shaping up to bring more change. We are looking at two categories that are driving the future of money: blockchain and fintech innovations.
Currently, about 300 million people, or 4% of the world’s population, are using cryptocurrencies in some form, and the number could rise significantly by the end of the decade. According to Gartner, by 2024, for example, at least 20% of large enterprises will use digital currencies for payment, store of value or collateral, which will disrupt current financial networks and business models. Gartner further sees cryptocurrencies being used for retail payments in about 3-5 years. Investors will increase and adopt their interest of cryptocurrency as an investment tool, namely as a hedge against inflation and as an alternative to gold. But some investors and companies are also interested in crypto to get into decentralized finance (DeFi).
Banks have to serve these companies, becoming digital asset custodians. DeFi is starting to attract institutional finance. Currently, cryptocurrency is about 0.08% of assets held, and some surveys predict that hedge funds could hold 7% of their assets in cryptocurrency in % years time. ,
According to the Gartner study, governments throughout the world are also opening up to blockchain and crypto now. So far, 83 countries are experimenting with or implementing so-called Central Bank Digital Currencies (CBDC), which represent 90% of global GDP. China has already implementing its own digital currency, the “digital yuan” and has distributed more than $5 billion of digital yuan until June 2021. India’s government is thinking about how to tax cryptocurrencies as its central bank develops its own CBDC.
Sven Franssen