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Shaping the future of finance

Or will CBDCs destroy banking?

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I keep wondering about the future. Governments vs Libertarians? Centralised vs decentralised? DeFi vs CBDC?

My conclusion is CBDCs will win, in the financial markets. Why? Because money is critical to our lives. It’s a key. You cannot ignore it. It’s what we created to make society orderly. I discussed this a lot and in great depth in Digital Human.

Interestingly the most popular decentralised currency is a stablecoin tied to the US dollar, for example. Tether is breaking barriers but is backed by the US dollar. It’s a stablecoin backed by a government coin. And this brings to bear the core of future thinking: will people trust something that is not supported by a government? Will people trust something that is purely supported by the people?

This is a difficult one and may be a generational thing. Maybe younger people will trust the technology and not care about any backing by government. However, markets and investors will look for the government’s backing.

This is already playing out with Tether and other currencies, which are backed by fiat currencies, and will continue in the future imho.

What does this mean?

It means that most cryptocurrencies, including bitcoin and ether, will be worthless in a decade and will be replaced by digital currencies backed by central banks – US dollars, euros and yuan – or by stablecoins backed by real assets, including US dollars, euros and yuan, and also gold and other investable asset types.

And that is the key and core of a currency: is it an investable asset?

It’s more than this. Currencies are immediately liquid and available. Cash is King, Queen, Jack, Knave and more. Cash and currency are immediately trusted and trustworthy. Then we move to cryptocurrency and ask: is this trustworthy and immediately spendable?

I wonder.

I wonder if I’m too old, jaded and cynical, or if I’m just too realistic, knowledgeable and wise.

We shall see.

But, if I put it another way, I’ve lost a lot of money in things that are investable assets from property to art, and the main investable asset I therefore trust is cash. As someone said to me the other day: if you cannot stick it up your backside, it’s not real.

Not sure about that but, if we do move to digital cash, what happens to my trust then? And what happens to my bank?

There is a huge debate in my head about whether future CBDCs go around banks or go through banks. Why would they need to go through banks?
This is probably the most important and most fundamental question about the future of our financial system. If central banks could run a techno-ledger using cryptocurrencies that they issue digitally, whey would you need banks, SWIFT, MasterCard, Visa or any of the systems that prospered in the 1900s. Those old, vintage systems become redundant, and maybe banks do too.

Of course, that latter question is too controversial, and I will return to the reason why, even with CBDCs, I don’t see banks disappearing. It is because the role of banks is not to exchange value. Cash does that, as does gold and any other investable asset. The role of banks is to store value, with trust. You don’t get that anywhere else today. Sure, I can place a USB stick up my backside, but maybe that USB stick could get lost or become unreadable.

Nah. The true role of banks, whether in a digital currency or cryptocurrency world, is to store and exchange value with trust. That’s why they’re regulated the way they are and why they exist the way they do. And that isn’t going away anytime soon.



Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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