Central bank digital currencies and stable coins have the potential to replace or at least dramatically improve bank accounts like today.
Despite their birth, digital currencies (CBDCs) and their derivatives issued by the central bank have evolved rapidly become a serious alternative to typical bank accounts. A CBDC is electronic money that is issued by a central bank and used by consumers and businesses instead of traditional money. The concept was publicized in a particularly interesting article published in 2016 by Warren Weber, a research consultant to the Bank of Canada, that extensively explored a currency issued by a central bank and supported by Bitcoin (BTC). Since then, central banks around the world have started to study the concept by setting up research and working groups, as well as international organizations such as the International Monetary Fund, the Bank for International Settlements and the CBDC Group’s think tank. .
The various effects of CBDCs have grown in importance in recent years as they offer a step-by-step approach to central banks interested in introducing a CBDC. The various types include synthetic CBDCs and stablecoins, which are denominated in local currency, but are issued by a private sector company in collaboration with a central bank or a regulated financial institution. While proposals for the use of synthetic CBDCs are currently being considered by central banks around the world, lStablecoins are the only one of the three forms of central bank digital money that are currently active and in the market. Stable coins are managed and transferred using digital wallet applications. Issuers are either self-regulated banking institutions or are supported by regulated banking institutions. Our research shows that the entire addressable market of CBDCs and their subsidiaries exceeds $ 18 trillionThis is the accumulated monetary value that is currently held in bank accounts around the world and, according to Trading Economics, can be requested immediately.
- Last month, the market value of the six major stable coins associated with the dollar rose more than 25%
The most notable contrasts between traditional bank accounts and stable coins are the improvement in speed, cost, and accessibility that stable coins offer compared to traditional bank accounts. In a traditional environment, even the most basic banking functions for storing, sending and receiving funds are only available to bank customers and are often associated with archaic processing times and fees.. Stablecoins solve these problems with their open access designs that allow consumers around the world to store, send and receive fiat currencies for free with just a smartphone and an internet connection.
Many new issuers have entered the stable coin market in recent years, with the total value of stable coins issued in US dollars Around $ 2.7 billion was reached in early 2019. While the first major stablecoin issuer, Tether (USDT), has maintained its market leadership by far over the years, these new issuers have contributed $ 700 million additional capital inflows into the stable coin area in 2018 and They accounted for $ 11.5 billion of the stablecoins’ annual trading volume of $ 1.1 trillion that same year.
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While the volume of stable coin trading has increased significantly over the years, the volume of payments has also developed remarkably. In 2018 According to data from Coin Metrics, payments in excess of $ 109 billion were sent through Tether. Although these numbers are fading compared to the many trillions of dollars transferred through bank transfers, they indicate significant demand for such a solution and compete well with alternative money transfer options such as Western Union Payments of approximately $ 200 billion are made annually.
A particularly notable feature of the stablecoin market is its efficiency compared to traditional emerging markets that operate in parallel currency markets. In particular, the difference between market exchange rates and official exchange rates has recorded double-digit percentage points in traditional emerging markets, although it continues to be a factor in the overall stable coin market. This has effectively created some of the most efficient parallel currency markets in history, largely due to its digital nature. For those who are currently operating in inefficient parallel currency markets – for example in Venezuela – stablecoins offer a viable alternative to local currency and payment systems that are particularly resilient to monetary policy setbacks.. Given the possibility of a complete closure of the banking system, as happened in Cyprus in 2013, stablecoins and bitcoin offer the only viable, functional, and large-scale alternative to traditional bank accounts.
There is still a long way to go before synthetic stable coins, CBDCs and CBDCs reach the mass market and become serious competition for traditional bank accounts outside of emerging markets, especially given the lack of service providers. that provide a full set of financial services to the end users of these solutions. However There is undeniable evidence of demand for these solutions in emerging markets that suffer from parallel currency markets or inefficient payment systems, and in any market that uses overly restrictive monetary policies.
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