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Universal Stablecoins, End of Money and CBDC: 5 Predictions for Future Money

7 min reading

Here are given 5 predictions which explains details about the future of money.

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With the advent of bitcoin, stable coins, and decentralized finance, the last 10 years have been a very crazy time for those of us who write for money. Many of the innovations we have seen since Bitcoin's debut in 2008 will endure for the rest of our lives. Some of them were canceled as inconvenient bugs. Here are five predictions for the future of money.

  • Decentralized funding will not overshadow centralized funding. At some point they just run away

Many of the features that Decentralized Finance (DeFi) offers to the masses will be copied by ordinary finance in the future. For example, there's no reason normal finance can't copy the automation and programmability that DeFi offers without learning the blockchain part. Even if ordinary finance copies the useful parts of DeFi, DeFi emulates ordinary finance by breaking into the same regulatory framework. This means that the DeFi tool will comply with Anti-Money Laundering/Know Your Client (AML/KYC) regulations registered or licensed by the Securities and Exchange Commission in the Office of the Currency Controller (OCC).

And not necessarily out of necessity. (It's hard to force a truly decentralized protocol to do anything.) Tools are complied with voluntarily. Most of the world's capital is legal capital. Legal capital wants to be where it is regulated, not where it is illegal. To seize this capital, DeFi has no choice but to cling to it. The result is that DeFi and Traditional Finance (TradFi) are blurring over time. People will not know or care whether the financial products they consume are under the guise of decentralized or ordinary finance.

But there will always be a bit of excitement, a real DeFi evading regulation and doing what it wants. Outsiders, hobbyists, activists, and criminals meet there.

  • El Salvador will not be known as a turning point. This is called a reality check

For many Bitcoin enthusiasts, the adoption of Bitcoin from El Salvador in 2020 was a turning point. First El Salvador, then the rest of Central America, then South America, then the United States. By 2030 the whole world will be a "hyperbitcoin". Looking ahead, the El Salvador Bitcoin Moment is seen as a test of reality.

Ordinary people don't like to use volatile things like bitcoin for payments. People who already have Bitcoins prefer to keep them in hopes of making them rich. People who don't own Bitcoin may not want to accept it as payment because they think it's dangerous. In short, Bitcoin remains the most important means of payment.

This means that all the resources El Salvador has dedicated to building a Bitcoin-based payment infrastructure will be wasted. Other countries that are close to accepting Bitcoin are witnessing the El Salvador currency experiment. If you see it doesn't work, put your own plans on hold. With this in mind, it would still be stylish for countries to "adopt" Bitcoin. But only in earnest, as a marketing ploy. Full bitcoinization efforts like in El Salvador will not spread.

Also read: Money's radical pluralism

  • Money will be lost. CBDC too

In the Bitcoin era, central bankers became envious. “We can do great things for money!” Thus, was born the idea of a digital currency for a central bank or CBDC. Some of the major western central banks will try CBDCs but will find that citizens have no appetite for electronic KYC versions of the dollar or euro - their existing bank or fintech will cater for most of their needs, thanks a lot. Given the weak demand for CBDCs, other central banks watching from the side will withdraw their CBDC aspirations.

Once their dreams of a CBDC are shattered, the central bank will be the only link with the commoners who are ancient paper money. But the use of physical banknotes in retail will continue to decline, and ATMs will become as scarce as phone booths. What was once a standard service at all bank branches - exchanging bank balances for banknotes - will become a rather exotic transaction in the late 2020s. If 2011 Millennials don't know how to write checks, Generation X won't know how to use cash in 2031. The central bank is scared at this point. You always enjoy being at the start and center of the payment system.

But they need not be afraid. We rarely think about the sewer system. We do not interact directly with the water supply and we are not interested in how the sewage treatment plant works. But in the end our whole lives depend on this unsexy infrastructure. The same will happen with the central bank. With money and CBDC off, we will never interact directly with the central bank. But without realizing it, every financial instrument depends on the central bank to process it. And that's good.

  • If the government does not enforce KYC on the internet, MasterCard and Visa will

In the future, most online content will be reviewed and linked to trusted content creators. The card network will be an important driver for this. Many are unaware that Mastercard introduced a new rule in October 2021. It requires all websites hosting user-generated pornography to adopt an authentication policy. You should also check all content for illegal material. Penalties for non-compliance must be removed from the Mastercard network. Since loss of access to the card means commercial death, most websites comply.

In the future, card networks will migrate their porn rules to all websites hosting user generated material. YouTube, Rumble, Twitter, Facebook, not to mention countless small sites, have to check their user identity and set real-time content moderation or get disconnected from the map network. The card network doesn't necessarily want to be the censor of the internet. The thing is, processing payments for illegal goods online is money laundering. To avoid possible penalties, Visa and Mastercard have no choice but to keep their networks clean.

Also read: Balancing social and financial capital to create better money

  • Together, there is a universal standard for stablecoins

But the dominance of the card network in online trading will at some point face constant competitors. Over the next few years, the stablecoin industry will go through many cycles of failure, growth, and mergers that will eventually leave behind some great stablecoins. Since it would be confusing for the public to deal with several different stablecoins, issuers would work together to develop an interoperable standard for stablecoins. Each of them will receive the other stablecoin in a 1:1 ratio, effectively combining them into one universal stablecoin.

Once this alliance is formed, stablecoins will leave the closed speculative world of DeFi and cryptocurrencies and enter the real world to attack card networks. To stop Visa/Mastercard shortness of breath, the Stablecoin Alliance needs to find a way to drive consumer adoption. Your first big win will be negotiated with Amazon to add the Stable Coins Accepted Here payment option. Since processing stablecoins for Amazon would be cheaper than cards, the Stablecoin Alliance could convince Amazon to offer 1% off all stablecoin purchases.

Will a 1% discount on stablecoins be enough to eliminate the card network? Who knows, but at least there will be competition.

 

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