Cryptocurrencies have the potential to eventually replace cash, according to new research from financial services giant Deutsche Bank.
Deutsche Bank analysts have made some predictions regarding the future of cryptocurrency. Strategist Jim Reid explained why cryptocurrencies are inevitable and how the existing fiat money system could crumble over the next decade, leading to soaring demand for cryptocurrencies.
Deutsche Bank Research released a special edition of Konzept entitled “Imagine 2030” on Thursday. Konzept is a regularly published research report that addresses the fundamental issues driving the world of economics and finance. In the 84-page special edition, Deutsche Bank analysts discussed contrarian ideas of how the 2020s may evolve.
“If one of the GAFA [Google, Apple, Facebook and Amazon] (or their Chinese counterparts BATX [Baidu, Alibaba, Tencent and Xiaomi]) for example are able to overcome regulatory hurdles…this would broaden the appeal of cryptocurrencies, hasten their adoption, and give them the potential to eventually replace cash,” per the report, which is led by Jim Reid, global head of fundamental credit strategy and thematic research at Deutsche Bank.”
The current fiat system looks “fragile,” particularly because of “decades of low labor costs” and inflation. Over the next decade, things could change and “demand for alternative currencies, from gold to crypto, could take off,” according to the report.
Cryptocurrency in the New World Order
Benefits of cryptocurrencies such as security, speed, minimal transaction fees, ease of storage and “relevance in the digital era” could help drive mass adoption in the years to come, it added.
One of the sections of the report discusses cryptocurrencies as “the 21st century cash.” Marion Laboure authored this section, with contribution from Anthony Chaimowitz, Market Research Lead for the EMEA and APAC regions at the bank. “Until now, cryptocurrencies have been additions, rather than substitutes, to the global inventory of money,” Laboure explained, asserting that “Over the next decade, this may change.”
To achieve widespread adoption, Laboure believes that cryptocurrencies must become legitimate in the eyes of governments and regulators. They must also “allow for global reach in the payment market.” Furthermore, “To do this, alliances must be forged with key stakeholders – mobile apps such as Apple Pay, Google Pay, card providers such as Visa and Mastercard, and retailers, such as Amazon and Walmart,” she opined. “If these challenges can be overcome, the eventual future of cash is at risk.”
Cryptocurrencies, however, need to become legal in the eyes of governments and regulators to become widespread, per the report. This would bring price stability, allow for global reach and see increased interest from companies in the payments industry, such as Visa and Mastercard, as well as from retailers such as Amazon and Walmart.
The Future of Cryptocurrencies
While many predict the end of cash in the years to come, Deutsche Bank believes that plastic cards could die out as smartphones make physical cards obsolete. “Whether it is through the eager adoption by millennials or the increased digitalisation of countries’ infrastructure, the plastic card could be on its way out over the next decade while people will still be paying with humble notes and coins.” Governments and banks are also moving towards a cashless society, per the report.