Central bank digital currencies (CBDCs) have been presented as a modern-day technology-centric alternative to physical fiat currencies with many central banks researching and testing their own digital currencies as the world moves incrementally in the direction of replacing physical cash with digital money. According to a blockchain expert recommended by the United Nation Alliance of Civilizations (UNAOC) Massimo Buonumo, if digital currencies are made available at the retail level, it is highly likely that citizens who have savings accounts will choose to hold digital currencies over leaving their money in the hands of the bank.
Buonomo raised this point up during an online conference last week and as reported by Coindesk, he believes that banks and credit card companies have held a “duopoly” over digital payments thus far, but CBDCs have the potential to destroy the status quo. The reason for this, he argues, is that people leave their money with banks and task them with the responsibility of safekeeping their cash due to interest accumulation, but should already low interest rates fall even lower into the negative territories, citizens are no longer incentivized to choose bank accounts over holding digital currencies.
“Those who are going to suffer the most are the credit card processing companies and the banks because, in the current interest rate environment, your advantage of having a bank account is that it enables digital payments,” he said.
However, digital currencies can easily fulfil this digital aspect of retail banking, which means that banks no longer have any added advantage to entice users into leaving their money with them. Moreover, bank and credit card transactions are notoriously expensive, but are a necessary evil as this is one of the only payment options that people may have.
Studies have shown so far that most central banks have no intention of rolling out a digital currency for retail customers. Currently, the most anticipated digital currency is certainly the digital yuan which is rumoured to be launching soon. All eyes are on the US to see if it will endorse a digital dollar project in the short term after it was suggested in Congress in March, while Accenture and a new non-profit organization the Digital Dollar Foundation recently came up with a proposed digital dollar whitepaper.
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