Stablecoins could put some banks out of business
The International Monetary Fund believes digital currencies are becoming serious
In a recent paper published by the International Monetary Fund (IMF), “The Rise of Digital Money,” the organization envisions a definitive “money tree” that would almost definitely include cryptocurrencies. It points out that digital currencies and stablecoins are becoming more real and more accepted, and believes that, at some point, they’re going to do what banks have feared all along – put them out of business.
In the paper’s introduction, the authors assert, “Digital forms of money are increasingly in the wallets of consumers as well as in the minds of policymakers. Cash and bank deposits are battling with so-called e-money, electronically stored monetary value denominated in, and pegged to, a currency like the euro or the dollar.”
They add, specifically of Facebook’s Libra project,” Libra coins could be exchanged into fiat currency at any time for their share of the going value of the underlying portfolio, without any price guarantees. … The transfer of Libra—essentially shares of Libra Reserves (though potentially without a legal claim) – would comprise a payment.”
The paper wasn’t written in an effort to paint a grim picture for the future of the traditional banking industry. To the contrary, it highlights that digital currency is going to happen whether banks like it or not and their best alternative is to embrace the technology and to perhaps consider joining the growing industry.
The report states, “One solution is to offer selected new e-money providers access to central bank reserves, though under strict conditions. Doing so raises risks, but it also has various advantages. Not least, central banks in some countries could partner with e-money providers to effectively provide ‘central bank digital currency (CBDC),’ a digital version of cash.”