No more joking – The Bank for International Settlements wants to launch its digital currency before the end of 2020. Benoît Cœuré, head of the BIS Innovation pole, announced the news on October 25 at the Bund Summit in Shanghai.
An imminent central bank digital currency
Chinese media The Paper was the first to report these statements. The Bund Summit is a non-governmental conference, organized in Shanghai by the China Finance 40 Forum between October 23 and 25.
The BRI, therefore, plans to launch a proof-of-concept of its MNBC / CBDC in the coming months. After having “ taken the cryptocurrency from above ”, the private institution based in Basel strikes back.
The experiments will concern, among others:
The issuance of a central bank digital currency;
Its connection with existing payment systems;
The management of digital identities ;
The banking supervision and compliance .
Many central banks will be there
The BIS will be supported in its approach by the Swiss National Bank . The partnership between the two institutions dates from October 2019. The digital currency will thus be issued on a blockchain , which “bitcoin dice” according to B. Coeuré. But in the future, other banking institutions should participate in this pilot project. He notably cited the Bank of Thailand , the Monetary Authority of Singapore and that of Hong Kong .
This announcement therefore follows the report on digital currencies released by the BIS and 7 other central banks in early October – the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, the Bank of Sweden and the Swiss National Bank. The 26-page paper describes the fundamentals of an MNBC :
The coexistence of these digital currencies with cash and other types of currencies in a flexible and innovative payment system;
Support for broader political objectives , without harming financial stability ;
Promotion of innovation and efficiency .
According to this report, 80% of the countries of the world have entered the research and development of digital currencies.
According to Benoît Coeuré, China , a leader in this field, has a lot to teach states wishing to follow in its footsteps. He also clarified that this is not a “revolution” that will solve current societal problems. MNBCs will be a better form of currency, supporting a more diverse payments ecosystem.
JP Morgan Sounding the Alarm: Young People Prefer Bitcoin to Gold
On October 23, bank JP Morgan mentioned bitcoin in a report on the company’s investment plans. Recent cryptocurrency news seems to have sparked some optimism. Surprisingly for such a conservative institution!
In 2017, JP Morgan described bitcoin as “a fraud that will collapse”. An opinion shared by several states and investment banks. Yet, on 23 October 2020, it published a report saying quite positive things about the bitcoin. This time, the top cryptocurrency is seen as an attractive “long-term” investment, just like gold in terms of a safe haven. The bank justifies this decision through several points.
For starters, PayPal’s cryptocurrency announcement has generated excitement. From now on, it will be possible to use bitcoin as an alternative currency, with more simplicity. The “millennials” are also cited as the main target. The financial giant specifies:
“Cryptocurrencies derive value not only because they serve as stores of wealth but also due to their utility as means of payment. The more economic agents accept cryptocurrencies as a means of payment in the future, the higher their utility and value,”
In addition, the firm explains that the upside potential in the long term is considerable insofar as it is this generation will become, over time, an important component in the financial markets.
Bitcoin, the gold of the 21st century?
Bitcoin has a huge advantage over gold: its usefulness. It is, for example, very easy to exchange, store or evaluate it. In addition to constituting a store of value, it can also represent a real means of payment, especially in countries experiencing high inflation.
Nevertheless, JP Morgan estimates that the “physical gold market” represents a capitalization of 2.6 trillion dollars, against 242 billion for Bitcoin. Thus, the top cryptocurrency still has a long way to go, if it really wants to compete with gold.
According to JP Morgan, however, bitcoin is still in the development stage. Indeed, only 7% of Americans have ever bought bitcoins. Likewise, some large markets, like Canada, do not yet have a formal legal framework. The margin improvement of bitcoin is still substantial in the coming years.
After Square and PayPal, it is now traditional banks that are interested in bitcoin. It is no longer seen as a scam, but rather as a viable asset over the long term. On the other hand, there are still many stages before a possible massive democratization, as JP Morgan points out.