On Digital Currencies - the Road Ahead
Last week, U.S. Securities and Exchange Commission Chair Gary Gensler was asked “What steps can you outline to bring regulatory clarity so that we can have a vibrant digital asset marketplace with legitimate money and the rule of law?"
His response: "The exchanges trading in these crypto assets do not have a regulatory framework … there’s not a market regulator around these crypto exchanges ... there’s really no protection against fraud or manipulation ...”
Also, a European Central Bank (ECB) survey about a digital euro said, “what the public and professionals want the most from such a digital currency is privacy (43%), followed by security (18%), the ability to pay across the euro area (11%), no additional costs (9%) and offline usability (8%).” The survey had over 8,200 participants.
ECB Executive Board member Fabio Panetta said, “A digital euro can only be successful if it meets the needs of Europeans.”
ECB President Christine Lagarde said, “Discussions are ongoing on whether to issue a digital euro to make our currency fit for the digital age, as a complement to, not a replacement for, cash.”
Separately, Li Bo, deputy governor of the People’s Bank of China said, “For the upcoming Beijing Winter Olympics, we were trying to make e-CNY available not only to domestic users, but also to international athletes and visitors.”
“For the internationalization of renminbi, we have said many times that it’s a natural process and our goal is not to replace (the) U.S. dollar or any other international currency … our goal is to allow the market to choose and to facilitate international trade and investment.”
Note: China's project has over 500,000 users and employs technology from Ant Financial and Tencent.
OUR TAKE
With over fifty central banks exploring digital currencies and hundreds of cryptocurrencies in use or development, the market is innovative and complex - and very confusing.
Successful digital currencies, distributed ledgers, tokens, and related technologies need to 1) execute transactions in a secure and timely fashion, 2) be easy to use, 3) operate cost-effectively, and 4) maintain value with minimal price volatility. Maintaining the trust of users and regulators is critical as well.
Expect more deployments and adaptation of digital assets and blockchains (in both centralized and distributed forms) to improve the processing, trading and management of value around the world.