Image a scenario where you need different messengers to send different types of messages — for example, WhatsApp for text messages, Viber for audio, Telegram for video, etc. Rather inconvenient, right? But this is exactly what happens in finance: There is no way to send both digital fiat money and cryptocurrency from a bank account without extra steps. It’s not affecting the masses just yet, but after the issuing of national digital currencies, or central bank digital currencies, in the next few years over the world, the situation is about to become complicated. We need to start looking for a solution now.
CBDCs require a multi-format framework
The traditional financial system can’t brush off new technologies anymore. According to the Cambridge Center for Alternative Finance, the number of cryptocurrency users has almost tripled from 35 million people in 2018 to 101 million people in Q3 2020. Another study, conducted by researchers from the United Kingdom’s Financial Conduct Authority, revealed a 78% increase since 2019.
Cryptocurrency operations are profitable. In Q4 2020 alone, PayPal increased its number of transactions by 36%, which is worth about $277 billion. The increase began in Q3 2020 when the company introduced crypto transactions. This is one of the best quarterly returns in PayPal’s history.
However, central bank digital currencies are going to become a part of our daily lives in three to five years. And we need completely new infrastructure for its mainstream adoption. China was the first to actively promote its digital yuan project — referred to as the Digital Currency Electronic Payment, or DCEP. China is fully focused on the infrastructure because several local banks have already developed or are developing their own e-wallets — the main tool for working with DCEP.