Even the experts are divided over what the future of the global digital payments system will look like.
At the Digital Asset Summit in London this week a panel of representatives from Credit Suisse, crypto exchange BitStamp, Fireblocks and FIS shared their views on the road ahead for the digital payments. While all agreed that crypto adoption has exposed a gap in the market for ultra-fast, free electronic payments they divided over whether digital currencies backed by central banks (CBDCs) or stablecoins, digital currencies linked to the price of real world assets, will come to dominate.
“There’s a value transfer gap in the market.” said Previn Singh, head of distributed ledger technology at Credit Suisse. “For us it would be really impactful if we had instant delivery for payments,” he added referencing the value of electronic currencies in facilitating cheap, fast, cross-border payments.
“I think it will always be a space for CBDCs,” explained Singh, who believes that while “stablecoins are going to be a really valuable component” of the payments landscape a “two tier” system is likely to emerge which will be dominated by state issued electronic currency.
Andrew Turner of FIS, a company which works with banks to develop CBDCs, echoed Singh’s comments and said that central bank backed digital currencies will be at the centre of the “new ecosystem we are moving to”.
“In the next five years we will see the first large iterations of CBDCs,” Turner added, explaining that central banks were worried about the threat posed by cryptocurrencies to fiat use.
By contrast Julian Sawyer, the chief executive of crypto exchange BitStamp thinks Stablecoins will come out on top.
“The adoption pivot is going to be when you can absolutely have categorical assurance around the value of your stablecoins,” he said.
Stablecoins have come under increased scrutiny of late because the location of some $70bn of reserve funds which back up Tether, a digital coin pegged to the price of the dollar, remain unknown. While Sawyer accepts “there are a whole range of issues with stablecoins which will need to be sorted,” he told City AM that he still believes “they will be the dominant factor” in a future digital payments system.
“What you’ve now got with stablecoins is just the beginning of the journey for helping you to manage your money better,” said Sawyer, explaining that while CBDCs signal a “technology refresh” for banks stablecoins are better suited to making cross-border transfers of value.