Though digital currencies have come up against a lot of challenges, consumers shouldn’t give up just yet, according to Darrell Duffie. Duffie, a professor of finance at Stanford GSB, believes that the next decade could be filled with a lot of success for this sector, in the event that banks don’t come up with faster and less expensive ways to transfer funds.
“The future is coming, and it will be very disruptive to legacy banks that don’t get with the program.”
Realistically, it is possible that Bitcoin won’t take center stage, as stablecoins that are pegged to the dollar are likely to be more trusted. It could also come from a digital currency that was developed by a central bank, or Facebook, or another option. However, regardless of the source, Duffie states that the next ten years will see the end of easy-access low-interest deposits.
While bank payment systems tend to be slow and rather expensive, cryptocurrency transfers simply offer a more affordable option. While wiring money may be quick, these transfers can cost around $25 to send $200 domestically, which doubles for an international payment. In cryptocurrency transactions, these same transactions happen almost instantly at a fraction of the cost.
Central banks have long been aware of these issues, considering that it was a worry at the start of the industry that cryptocurrency would threaten the traditional system. A recent survey by the Bank of International Settlements revealed that the majority of the central banks around the world are performing research on the way to develop their own digital currencies as one approach.
Facebook’s Libra token, as controversial as it may be, has both central banks and commercial bankers interested. There’s been many concerns over the potential for illegal use cases (like money laundering), which has already pushed away some of the original supporters of the token, including Mastercard and Visa.
Even if the Libra token never comes to fruition, Duffie believes that there will be a combination of pressure from the public, technology, and economics that will end up disrupting the way that the traditional banking system works today.