A range of industry-related studies show that national banks in the world’s major economies are getting ready to open their doors to crypto, including minting new ones. Many experts and predicted and anticipated this step to become the next trend shaping the industry.

The takeaway

• National banks are finally eyeing cryptocurrencies as the next step in the evolution of finance
• The fact has been confirmed by the Bank for International Settlements
• National economies are slowly integrating Central Bank Digital Currencies (CBDCs) into their operations

The notion of cryptocurrencies is becoming more and more popular among the national banks in most countries. National economies are getting tired of ignoring the industry that is turning modern finance into decentralization and digitalization. Many national banks have even expressed the idea of creating their own digital currencies, referred to as Central Bank Digital Currencies (CBDCs), which are digital assets that represent fiat money. In other words, they are another cryptocurrency but are minted by central banks in different states.

According to the report from the Bank for International Settlements (BIS), the idea of a CBDC is receiving a lot of attention these days, but that attention has been triggered by different motivators across countries. Just a few years ago, the crypto industry was fighting to be legalized across the globe. Today, it is entering the public sector.

According to the BIS’s study, the number of public speeches dedicated to cryptocurrencies has boomed in the last few years. Although some in the financial sector remain doubtful about state-issued digital currencies, the pace of banks moving toward CBDCs has been increased by the COVID-19 pandemic, its social distancing principles, and fears that banknotes may carry and transmit the virus. The switch towards digital money has been fast-tracked, and there’s no use denying it.

The tone and sense of the speeches have been slowly changing from skepticism and judgment to exploring possibilities and acceptance. According to the BIS’s study, the number of speakers welcoming crypto has significantly surpassed those with a negative attitude. The BIS conducted a survey of all the speeches about crypto, including the opinions of national banks. The findings revealed considerable progress compared to the 2018 statistics, which found four pessimistic opinions per optimistic one.

National banks’ focus on digital currencies and CBDCs isn’t mere curiosity. They have gotten down to studying the issue and looking for new approaches to crypto. By the middle of July 2020, more than 30 banks had already released a publication about CBDCs. And that’s just the beginning.

Some countries have started to develop a system for implementing and distributing CBDCs, with a range of cryptocurrency-related projects in development. At least 18 countries have released publications about implementing a CBDC in their economies. Another 13 declared that they were investigating the industry and exploring ways of incorporating wholesale a CBDC into the state’s financial sector for further bank use to lower transaction costs and speed up payment processing.

The real number of national banks ready to accept crypto is much higher than the stated number of banks officially anticipating the technology. According to the BIS’s research from January 2020, around 80% of national banks globally are considering opportunities to join the crypto movement.

While some banks have only taken the first steps toward crypto, US financial authorities have already started partnering with experts from the Massachusetts Institute of Technology to build and test their own digital currency. The Federal Reserve is trying to get a better understanding of cryptocurrencies and has been looking into fintech for a few years already.

The National Bank of Brazil is on the list too. It has created a group of 12 specialists to explore ways to offer a digital substitute for the US dollar. The move was accelerated by the suppositions that a CBDC would contribute to faster transactions between people and organizations, including transborder payments. The team aims to bring a Brazilian CBDC to life is supposed to provide a report on their work within six months.

The arrival of new payment technology is a natural step in the evolution of finance, corresponding to evolving human demands. Governments are turning towards crypto isn’t just a mainstream move. There are clear reasons for the growing interest in digital assets. They promote fast, secure, and irreversible transactions. They have taken the best parts of cash and non-cash funds and created a new type of money.

State financial authorities will find cryptocurrencies useful in many ways. Digital fiat will provide lower costs for fast money transfers because no third parties, such as correspondent banks, will be required to process the payment. Managing transfers in crypto will be safer, and central banks will be able to track the location of each coin and prevent fraud.

However, legal issues with crypto are still present in many underdeveloped and developing economies. Many countries are not ready to accept global decentralization for a number of additional reasons, such as a low level of innovation, poor internet connections, underdeveloped technologies, and little attention to fintech. These barriers should be dealt with to let crypto unleash its power.