The digital currency revolution is already here, and banks and credit card companies have reason to be nervous

While Bitcoin is arguably one of the most important computing innovations of a generation, ushering in the blockchain revolution, it may be just a small player in this new world of digital money and of digital capital.

It is not because it has other competitors in local cryptocurrencies. On the contrary, now that the tech genius is out of its bottle, the state and the private sector are taking notice and stepping up a gear.

Although these are only the first days of this revolution, the contours and trajectory are clear and unstoppable. Capital as we know it is reinventing itself.

Let me explain:

In the first age of the Internet, software revolutionized media industries like information, music, advertising, and television, and eventually spread to a few others like retail, customer service, and education. The second age of the Internet will make these changes picturesque.

Emerging technologies like artificial intelligence, which automates decision-making, and blockchain, which programs trust in our economic systems (and displaces middlemen), have already started to disrupt capital as we know it.

Capital has always been narrowly defined as “money and other financial assets” – gold, stocks, and hard cash. Traditional capital is stored in vaults and banks and forces us all to rely on trusted intermediaries to manage our assets. Every time you buy a coffee, send money to your kids, or make a mortgage payment, you are interacting with an intermediary who is extracting value from the transaction.

Digital capital changes that. Digital capital can be moved, stored and used online seamlessly, instantly and securely without relying on banks, credit card companies and other intermediaries.

Most importantly, digital assets are smart and programmable. Let’s say you send money to your kid who is studying at college. You can now schedule the money to only work at certain retailers like Walmart and Whole Foods, rather than the Ontario Cannabis Store or LCBO.

By rethinking capital, we can re-imagine markets, money, and finance. Swathes of the trillions of dollars presently worth the financial services industry – banking, payments, and even money itself – will be called into question, contested and disrupted in the years to come. .

Money is where this digital transformation is felt first. Indeed, money as we know it will be radically transformed over the course of the decade, and we’ve already been offered a glimpse of what that will look like.

The most recent actor to emerge in the money world comes in the form of private companies like Facebook, whose Libra cryptocurrency initiative would instantly make it the world’s largest financial institution.

While Libra promises to provide access to financial services in countries where Facebook accounts outnumber bank accounts, these companies are not accountable to the public good like governments are in a democracy. It’s no surprise, then, that Libra’s announcement met stiff opposition from wary policymakers.

Regardless of the Libra launch (and I think it will), other tech giants like Alphabet or Amazon will certainly follow suit with their own corporate currencies.

Faced with this reality, the next steps for decision-makers have never been more consistent.

In August 2019, central bankers from around the world gathered for their annual Jackson Hole Symposium. There, the outgoing Governor of the Bank of England, Mark Carney, approved what could be the biggest change in the global financial system since the Bretton Woods agreement of 1944.

At the symposium, Carney advocated for replacing the US dollar as a reserve currency with a new global currency, fully digital and backed by a basket of digital currencies from a number of central banks.

In Carney’s opinion, this currency would look a lot like Libra, with some central banks forming a consortium to rule the virtual currency. The world’s reserve currency would therefore be determined by the Canadian dollar, the British pound, the euro, the greenback and possibly more – a monumental change.

While central banks have yet to approve the idea, it appears they are taking digital currencies more seriously. Earlier this month, the central banks of Canada, the euro area, Japan, Sweden and Switzerland formed a group to research and share information on digital currencies.

In Bitcoin and Libra, we saw two different visions of the future of money laid bare. What our leaders will do next, and how quickly they act will determine whether these roaring 2020s will not end in a crash, but in a new era of prosperity.

Alex Tapscott is a bestselling author, speaker and editor of the recent Financial Services Revolution, a collection of research examining the impact of blockchain on money, markets and banking, available in Canada and the States. – United now.
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