- Deutsche Bank’s analyst Jim Reid has published a new study entitled “Imagine 2030”.
- In the study, Reid describes the potential of the cryptocurrency industry to revolutionize the established financial system by 2030.
Although Bitcoin has been around for almost 11 years, Satoshi Nakamoto’s invention is still far from becoming a world currency. According to a new study by Deutsche Bank and its chief analyst Jim Reid, Bitcoin and other cryptocurrencies could replace the current Fiat currency system by 2030. As Reid describes in his research entitled “Imagine 2030,” the crypto industry has the potential to replace the established financial system by 2030.
An important factor for this trend, as Reid notes, is the increased demand of people for dematerialized means of payment and anonymity. Reid also points out that uncontrollable inflation and the rise in the gold price in the 1970s after the end of the gold-hedged monetary system could be a major cause of the trend towards cryptocurrencies.
The Multi-Billion-Dollar (or Bitcoin) Question
According to Reid, the global inflation might cause the populations of the world to lose confidence in paper money. According to Reid, global inflation has been limited in recent years by China’s economic growth and its rise as “the greatest suppressor of global inflation in the last four decades” thanks to a massive increase in labour supply. This era is coming to an end. According to the findings of the study, the Fiat system is now held together by “fragile” parts:
The forces that hold the fiat money system together look fragile, particularly decades of low labour costs. Over the next decade, some of these forces could begin to unravel and demand for alternative currencies, from gold to crypto, could take off.
As a result of rising inflation and the burden of negative interest rates on citizens, doubts about state-sponsored money will increase and demand for alternative currencies will rise. After all, cryptocurrencies could replace the current financial system with Fiat currencies, as Reid noted:
Eventually, it is possible that inflation will become more and more embedded in our system and doubts will rise about the sustainability of fiat money. The demand for alternative currencies will therefore likely be significantly higher by the time 2030 rolls around. Will fiat currencies survive the policy dilemma that authorities will experience as they try to balance higher yields with record levels of debt? That’s the multi-trillion dollar (or bitcoin) question for the decade ahead
Furthermore, the Deutsche Bank analyst points out that cryptocurrencies have significant advantages over the current monetary system, such as “security, speed, minimal transaction fees, easy storage and relevance in the digital age”. Nevertheless, Reid notes that they have not managed to assert themselves as a means of payment. However, he gives a different outlook for the future:
This situation could be different in the future.
The challenges for cryptocurrencies
According to the study, cryptocurrencies have to overcome three major hurdles in order to achieve greater acceptance. These include legitimizing them in the eyes of governments and regulators, which would increase price stability and enable global reach in the payment market. This requires alliances with key stakeholders such as mobile apps like Apple Pay, Google Pay and card providers like Visa and Mastercard, as well as merchants like Amazon and Walmart.
At the same time, Reid pointed out that the introduction to the mainstream will create new challenges. Among the biggest threats to the supposedly digital currency-based financial system, Reid cited the dependence on electricity, cyber attacks and a digital war.
Regarding the study, it should be noted that Jim Reid has repeatedly warned of a financial crisis and the unstable Fiat currency system in the past. As early as September 2017, he published a similar study for Deutsche Bank in which he warned of the collapse of the currency system and emphasized the potential of cryptocurrencies.
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While Reid warns of the collapse of the financial system, governments around the world are already discussing the need to develop national digital currencies. In countries like China, Japan, British Virgin Islands and France there are already specific plans and developments.