The Russian media recently published "National Events: Digital Currencies May Eliminate Banks", saying that analysts at the Federal Reserve concluded that central banks of various countries embarking on the establishment of sovereign digital currencies will pose a threat to the entire banking system.
Recently, news that more and more countries are considering establishing digital currencies has sounded the alarm for the world banking industry. And countries that take the lead in using digital currency will gain a great advantage due to a more professional and efficient financial system. Someone said: "In the next 3 to 5 years, the banking industry may collapse...".
In the next 3 to 5 years, the banking industry may collapse
Digital currency and blockchain technology will likely bring unparalleled losses to the banking industry, and this has been said for a long time. In 2016, the head of Sberbank, German Gref, warned: "In the next three to five years, the banking industry may collapse."
Advocates of new technologies believe that if digital currency is used to replace the current legal currency, traditional contracts will be replaced by electronic contracts, and credit will also skip third-party platforms and proceed on a peer-to-peer basis. The need for states or banks to act as intermediaries would disappear.
In recent years, the attitude of many countries towards blockchain and digital currency has changed from rejection to acceptance. Basically every major country has begun to research related technologies, and most of the top 500 companies are investing a lot of energy in research and development of blockchain technology in order to bring Come new technology and more efficient operation efficiency.
At the same time, some governments and central banks are eager to permanently suspend physical currency, because physical currency requires a lot of manpower and material resources in printing, monitoring and anti-counterfeiting, and will also create a "shadow economy". (Shadow economy: refers to the economic market where the state cannot implement tax management and monitoring.)
Moreover, digital currency can be quite effective in checking tax evasion, and will greatly increase the difficulty of money laundering for criminals. Undoubtedly, a digital currency under unified management can do all this in the future. It is impossible not to admire this ability.
The status of the central bank may change
Money is now issued through a two-tiered system:
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Provided by the central bank to banks at a certain interest rate to ensure liquidity of funds.
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Banks become secondary issuers, pumping money into the economy by extending credit and absorbing some of the funds of residents and organizations in the form of deposits.
Once a unified digital currency that can be circulated is issued, the central bank will no longer be just an arbiter and regulator, but a real player. This is actually nothing new in history. For example, the Bank of England, founded in 1694, is one of the oldest central banks in the world, and its main purpose is to collect profits. It is completely free to compete with other banks, accept deposits and extend loans to commercial establishments on equal terms.
The First and Second Banks of the United States and the predecessor of the Federal Reserve have all done the same. In some other countries, institutions like central banks completely dominate the national credit system. For example, in 1900 the Bank of Spain controlled 68% of credit assets and 73% of savings.
In the 20th century, the banking landscape began to change. As the deposits of private banks gradually expand, the central bank has become the lender of last resort. Its task is to maintain financial and macroeconomic stability, and its functions are only issuance and supervision.
Now you may have to go back to the beginning. Digital currencies place new demands on banks. Due to the emergence of Internet broadband, the central bank does not need to establish many business outlets to deal directly with customers, which fundamentally simplifies business procedures.
potential
In the blockchain system, digital currency can be sent directly to the accounts of residents and institutions.
In this way, the need to distribute the amount of funds through intermediaries disappears. Of course, for banks, there are also time deposits. But the prospects here are not so bright.
Due to inflation, the interest given by the bank is actually negative interest to some extent. If there are other options, depositors may not be willing to deposit their money in the bank.
In addition, the issuance of digital currency has many additional benefits for the central bank. For example, monetary and credit policies will be more effective, especially in the event of a crisis. After the 2008 economic crisis, central banks of various countries injected trillions of funds into their financial systems, but failed to restore economic growth to pre-crisis levels, because a large part of the money went to the securities market, but the assets in the securities market did not exist. Get the valuation you deserve.
During this epidemic crisis, governments of various countries have successively adopted "helicopter money" to stimulate GDP, that is, sending money/consumer coupons directly to consumers. The most stark example of this is the US government's decision to send eligible US adults $1,200 each. Compared with the ordinary way of sending money, digital currency is actually more suitable for this way of sending money.
Experts pointed out that if the central bank can also receive fiscal deposit subsidies, the competitiveness of the banking market will be greatly reduced, and the mediator may become a monopoly of savings. Commercial banks are also bound to be affected. Countries that take the lead in adopting digital currencies will gain a greater advantage due to a more professional and efficient financial system.
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