The future of money is getting crowded, and KPMG likes it that way. A recent report by the Big Four accounting firm suggests that various forms of digital money, from central bank digital currencies (CBDCs) to stablecoins and tokenized deposits, will coexist within financial markets over the next decade.
This isn’t a winner-take-all race, according to KPMG. Instead, different digital money solutions will cater to specific needs and preferences. Users, the report predicts, will gravitate towards the most efficient and automated options available.
Banks Eyeing CBDCs, But Retail Rollout Uncertain
Central bank digital currencies, or CBDCs, are getting a lot of buzz. Pilot programs and widespread testing signal a clear shift towards a tokenized financial system. Nearly all central banks globally are exploring CBDCs, with some even launching their own.
While banks see potential in CBDCs for businesses (wholesale CBDCs), a widespread retail launch faces headwinds. Economic and political uncertainties, along with technical challenges, create a climate of doubt. Some argue that existing digital options like stablecoins and tokenized deposits offer similar benefits, making CBDCs somewhat redundant.
Tokenized Deposits: Faster Cross-Border Payments on the Horizon
Tokenized deposits are another exciting prospect for banks. Their seamless integration with existing regulations makes them ripe for experimentation. Distributed Ledger Technology (DLT) promises to revolutionize traditional deposits, enabling faster, cheaper cross-border payments.
However, the jury’s still out on the exact role of tokenized deposits. Will they simply be digital cash, or will they serve a different purpose, like collateral?
Stablecoins Lead the Charge in Digital Money Innovation
So far, stablecoins appear to be the most promising form of digital money. Initially used for crypto trading, they are seen as having long-term value in areas like cross-border payments. Stablecoins could even pave the way for instant settlements (T+0) through a combined transaction process.
Regulation and reserve management remain concerns for stablecoins, especially during periods of high user demand. However, KPMG predicts wider adoption of stablecoins and tokenized deposit solutions by banks in the near future, with CBDCs further fueling the global growth of digital money in the coming years.
Also Read: No Big Brother Bucks: House Passes CBDC Anti-Surveillance State Act
The future of finance seems to be a diverse smorgasbord of digital money options. Only time will tell which ones will truly flourish, but one thing’s for sure: the traditional cash register may soon become a relic of the past.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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