What form of Digital assets will be the future of payments? | Empirex Capital

What form of Digital assets will be the future of payments?

Not all digital assets would be treated as harshly as cryptocurrencies and not all will become the future of money. In this article by Empirex Capital we will take a look at the current economic transition of digital assets.

We’re living in a time where digital assets are moving towards mainstream adoption. From retail customers to traditional banks and financial service providers, digital assets are on the rise. Many of these assets promised to disrupt financial markets and large incumbents, and while they have received widespread attention, they haven’t quite achieved their potential. That said, large institutions are taking notice — 86% of the world’s central banks are exploring digital currencies, according to a report by the Bank for International Settlements.

They recognize that despite being in a golden age of innovation, payment systems remain somewhat archaic. And so, in my view, there is no reason why current payment systems won’t follow a similar trajectory to industries that have been transformed by new technology in the past decade.

After all, the world we live in is now digital, so it makes sense that money and assets should follow suit. But how realistic is this in the next five years? And will the technology and type of digital assets look the same?

Large organizations beginning their digital assets journey

Institutional interest in cryptocurrencies continues to grow. Goldman Sachs surveyed over 300 of its high-net-wealth clients, finding 40% of them are already exposed to cryptocurrencies. More recently, Banco Bilbao Vizcaya Argentaria (BBVA) — Spain’s second-largest bank — announced it will launch a Bitcoin (BTC) trading service for private banking clients in Switzerland, while Citigroup is considering providing trading, custody and financing services.

And then there are central bank digital currencies (CBDCs). Infrastructure providers are trying to position themselves as ready for CBDCs. SWIFT and Accenture recently published a joint report which outlined how it could work as a potential carrier of CBDCs, should they become a reality. Furthermore, central banks worldwide are exploring CBDCs and working to safeguard public trust in money and payments. These retail and wholesale CBDCs can do this by offering the unique features of finality, liquidity and integrity, while also providing security. For example, the most promising CBDC design would be tied to a digital identity, requiring users to identify themselves to access funds. This new venture fosters innovation that serves the public interest.

However, it is still the early days of the development of cryptocurrencies, CBDCs and other forms of digital assets. There is a near-unanimous view that these assets need to become more standardized, secure and robust before entering the mainstream.

Finally at Empirex Capital we believe that in the coming years, digital assets such as Bitcoin and Ethereum are likely to face scrutiny from financial regulators and central banks before being allowed as a secure form of payment. This is to be expected. Anything that may affect the proper functioning of the international monetary and financial system will rightly face obstacles from its guardians and those responsible for its operations and security.

Created on 13th Aug 2021

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