Several new forms of money and capital have emerged in recent years: cryptocurrencies, digital currencies, and NFT. Some countries are testing CBDCs, and others are introducing cryptocurrencies as a form of payment - finance is rapidly shifting to the digital realm, and with it comes new concerns for regulators, investors, and entrepreneurs.
The financial cryptosystem is very similar to the traditional one. There are classic assets - currencies, stocks, structured notes, derivatives, bonds, etc. Almost everything that happens in the crypto world has a clear analog. However, unlike classic financial processes, which require a lot of paperwork, everything happens much faster in the digital world.
From a consumer's perspective, using a CBDC and an online bank
is likely to be about the same experience. But there is a fundamental difference. All non-cash money is now issued by and accounted for by commercial banks. And in the case of central bank digital currencies, the primary direct issuer of money and also the final one becomes the central bank.
The main reason for the emergence of CBDC is the automation and greater efficiency of digital currencies and assets. There are five functions of money: a measure of value, means of circulation, means of payment, means of accumulation, and global currency. Digital currencies and assets are much more efficient in these five functions of money. They also enable traceability and automation, for example, in the collection of transaction taxes.
In the next 5-10 years, almost all central banks will issue their digital currencies, either freely convertible or stablecoins. And all these currencies will interact with each other.
There is
the controversial experience of El Salvador, which has made Bitcoin an official currency. On the positive side, there has been a huge PR effect and an influx of investment into the country. It is an expansion of opportunities for the population, especially in cross-border payments. But there have also been challenges. The high volatility of cryptocurrencies, especially Bitcoin, can seriously affect people who buy the currency at the wrong time. There is also the need for infrastructure - wallets, ATMs, Bitcoin acceptance points, etc.
China is another
drastic example. The country has been testing the digital yuan for about a year. The experiment is now in the active phase, involving large companies, automating the payment of taxes on a transaction basis, and automating all smart contracts.
Switzerland has chosen the path of
active regulation: all digital assets are divided into four classes, each with its own law and licensing.
Each country has chosen a different path. This experience can be used by countries that are developing CBDC now.
Institutional and private investors already view cryptocurrencies as an average specific alternative asset, just as they view hedge funds or private equity and venture capital funds. It's a different type of asset, but a lot of countries already have enough reasonable tax regulations on investments in these types of assets. Therefore, this area will evolve in a standard way.
A digital financial asset is now mainly a liquidity tool, needed to attract and allocate liquidity.
For corporations, this is raising debt financing or organizing joint ventures through a digital financial asset.
For small and medium-sized businesses, this is a new market.
For retail investors, this is a new investment tool.
Private investors will have access not only to blue chips, not only to conservative companies, but to some startups. And institutional investors will be able to participate in the purchase of digital financial assets for their purposes - for example, to issue loans in this form. The market is competitive, and it shows that not only banks and IT companies are interested in it.Based on the current situation, the demand for digital finance has increased. Companies are looking for new ways to work in the market, attract and place liquidity, manage money and interact with other companies.
Today's challenges for businesses, investors, and governments are very tactical because of the situation in the world. The planning horizon has shrunk to a month or even a week. But at the same time, a great many innovations are taking place. There are financial innovations and changes in socio-economic formats and paradigms. We are at the very beginning of this journey.
