The Future of Currency in a Digital World





April 17, 2019







Although cryptocurrencies seem like a completely new phenomenon, this panel reminds us that the creation of new currencies actually happens quite often. In fact, many currencies that are in circulation today haven’t been around for very long: the Federal Reserve in the United States was created in 1913, and the Eurozone was established in 1999.

For the past centuries, we have been continuously improving our currency systems, and in the digital age, it makes sense that the next currencies might look something like crypto assets. Michael Waitze, Founder of Michael Waitze Media, joined a panel of leaders in digital currency innovation to discuss whether or not crypto assets will reach the same level of distribution as fiat currencies.







PBWS welcomed to the stage:





Jack Gavigan, COO of ZCash

Jean-Paul Servais, Chairman of the Financial Services and Markets Authority

Thierry Bedoin, Chief Digital Officer at the Banque de France

Franck Guiader, Head of Innovation and Fintech at Gide Loyrette Nouel





The panel explores what needs to happen in order for cryptocurrencies to become normalized. Here are some key insights:



Cryptocurrencies have a lot in common with the Euro The first cryptocurrencies were introduced because of distrust in banks The role of central banks and regulators is changing Regulations can help make people trust cryptocurrencies Fiat currencies will eventually be tokenized





Cryptocurrencies have a lot in common with the Euro



The panellists discuss the fact that when the Euro was introduced, it was because of unrest about currencies like the Franc, and how the Eurozone was created in order to facilitate a more stable money flow. Despite the good intentions, people were still fearful of using the new currency, and there were some complications. However, as Michael Waitze points out, “nobody died.” A similar phenomenon is happening now with cryptocurrencies, because people who don’t understand them tend to be fearful and distrusting of them. In European Central Banks, for example, crypto assets aren’t even classified as real currencies, that’s why they are called “assets.”





The first cryptocurrencies were introduced because of distrust in banks



Jack Gavigan reminds the audience that Bitcoin was introduced in 2009, just after the financial crisis, when many people were frustrated with bankers, and there was a “backlash against the traditional financial system.” For Gavigan, it’s also a sign of a generational change, as young people “distrust the financial system and want to change it.” Significantly, unlike the implementation of the Euro, these currencies are “permissionless” and don’t need approval from regulators, and aren’t bound by borders. Consequently, finding a way to convey trust will be an important step in normalizing cryptocurrencies.





The role of central banks and regulators is changing



According to Thierry Bedoin, the two main concerns for central banks are financial stability and consumer protection. However, with the popularization of cryptocurrencies, that’s going to mean becoming more innovative. Modern central bankers therefore need to be “more proactive and ready to put digital money into the economy.” This will be paramount for drawing interest from crypto players that aren’t legally required to seek advice from regulators or central banks. Jean-Paul Servais also shares a provocative statistic from the ESMA, that says that in 2017, most cryptocurrency development was in the United States, Switzerland, and Singapore, and then in 2018, after the introduction of the first regulations for ICOs, 70% of activity moved to the Virgin and Cayman Islands. Does this mean that some crypto companies are trying to avoid regulations?





Regulations can help make people trust cryptocurrencies



Thierry Bedoin also notes that while it’s impossible to regulate cryptocurrencies, it’s necessary to regulate the intermediaries that will convert them into fiat money. Such regulations are already being created in Europe, but for regulators, it’s difficult to balance the need to be innovative and the need to protect customers, because while the general consensus is that fostering innovation is a good thing, if there was an accident they would be considered “too liberal.” The panellists speak a lot about bridging the gap between digital currencies and fiat currencies with regulations, but Franck Guiader argues that since the digital economy is in fact the economy, the regulations won’t be a barrier between the two worlds, but just what allows the “creation of a new form of instruments and a new form of transactions and flows in the economy.”





Fiat currencies will eventually be tokenized



More and more people are willing to use stable coins, however the percentage is quite small compared to the amount of people only using fiat currencies. Therefore, there will need to be a social shift in how much trust consumers have in cryptocurrencies. The fact that crypto providers don’t need permission from authorities to create their coins means that there has been a lot of experimentation with new types of currencies (like Bitcoin, Zcash, and Ethereum). Jack Gavigan predicts that it’s only a matter of time before central banks co-opt the successful ones and create tokenized euros, dollars, and pounds.





This was only a sample of the key takeaways from the “Future of Currency in a Digital World” panel. The full transcript of the panel is available below for more insights.



