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Cryptocurrencies such as bitcoin could rise to their full potential and eventually replace cash over the next decade, Deutsche Bank said in a new report.
The bank has published the 'Imagine 2030' report in which it has highlighted several ideas for what the coming decade may hold. This includes innovation in the payment space which could see the end of fiat money and plastic cards, India’s expansion, the rise of drones, risk of rising corporate taxation and others.
Deutsche Bank said cryptocurrencies have been “additions, rather than substitutes, to the global inventory of money” so far, but added:
“Over the next decade, this may change. Overcoming regulatory hurdles will broaden their appeal and raise the potential to eventually replace cash.”
The report goes on the say that the forces that held the current fiat system together up until now have started to look fragile and could unravel in the forthcoming decade. If that happens, it could lead to “a backlash against fiat money and demand for alternative currencies, such as gold or crypto could soar.”
The bank pointed out that for cryptocurrencies to reach their full potential, the key would be what happens in China and India – the world’s two most populous countries. While China has already banned cryptocurrencies, India is still in the process of determining the legal status of cryptocurrencies. But the report noted that “things are moving quickly” while referring to the recent blockchain endorsement by Chinese President Xi Jinping and central bank digital currency (CBDC) efforts in both the countries.
The report further said that cryptocurrencies need to overcome three major impediments to achieve widespread adoption – legitimacy in the eyes of governments and regulators, price stability, and global reach in the payment market. Also, for a successful transition to a digitalized platform, efforts have to be made towards building a sound financial infrastructure that could tackle electricity shutdowns and cyberattacks.
“As we look to the decade ahead, it would not be surprising if a new and mainstream cryptocurrency were to unexpectedly emerge. Some countries with historically-strong banking industries are trialling cryptocurrencies,” the report said. “Separately, cryptocurrencies may constitute the best tool for a digital war. The question is which country will take advantage of being the first to obtain licenses and build alliances. As that occurs, the line between cryptocurrencies, financial institutions, and public & private sectors may become blurred.”
