The Next Step! The Digital Path?

In March, the European Union is planning to have a pilot test for market infrastructures of a digital token, a CBDC (Central Bank Digital Currency), based on digital ledger technology (DLT).

The test is meant to “trial the adoption of trading and settlement of tokenized securities before the regulation is amended to accommodate them.”

Of special interest is DLT-enabled securities trading, which will take trading, trade execution, clearing and settlement operations into one process.

That is, the swap of a security token for a money token is the result of a settlement.

Also, the use of CBDCs in new approaches to foreign exchange trading is another area of development. Essentially, the new architecture facilitates cross-border and offshore payments in an instant.

This development could be massive for the payments system.

And, that is what we may be on the edge of.

Digital currencies are being developed around the world. Much of the development has not attracted much attention due to all the attention that has been given to the events occurring around the evolution of cryptocurrencies.

But, things are happening.

For example, we hear that

“About 11 countries have launched a CBDC, while 17 are running a pilot program on them.”

“A further 33 have one under development and 39 are carrying out research on CBDCs.”

The world is turning digital, something I have encouraged for quite a few years now.

We still don’t know what that world is going to look like, The evolution of the digital world is still in the progress.

It looks as if blockchain technology is going to play a big role in this “new” world, as digital ledger technology grows and expands as it is needed.

Here, of course, the digital world gets tied back to the events in the world of cryptocurrency. Blockchain technology was the foundation of so much of the advancement made in the world of cryptocurrencies. Of course, the technology could not be blamed for the mismanagement or misuse of the resources that were being developed.

But, blockchain is going to play a very big role in what comes next.

Ousmane Jacques Mandeng, a visiting fellow at the London School of Economics and Political Science, a senior adviser at Accenture, and an adviser on several CBDC products, contends that:

“Central banks have remained undeterred to deploy the technology (of the blockchain) to facilitate CBDCs.”

Given that the crypto world is a heavy user of blockchain technology and the crypto world has had many, many serious problems lately, it is important for us to see that central banks still find blockchain technology acceptable.

“It is an affirmation that cryptos and blockchain are two different things.”

And, so on into the future.

And, This Is The Future

It is unfortunate that the “crypto world” has gotten so much attention in recent years. All this attention directed in this way has really given the world a false idea of where the field of money and finance is going.

There are, to me, two major reasons why the “crypto world” got so much attention over the past several years.

The first reason is the asset bubble created by the Federal Reserve System that saw so much money going into investment in crypto assets.

It is inconceivable to me that the price of a bitcoin could have risen from around $10,000 or so in the early 2010s to around $67,500 in November 2021 without all the money that was pumped into the financial system by the Fed during that time period.

Yes, there was good reason for the Fed to worry so much about the spread of the Covid-19 pandemic and the subsequent economic recession. Yes, the Fed needed to err on the side of monetary ease to make sure the system didn’t “break,” but, having so much money thrust into the financial world did create some interesting distortions.

All the money flowing into investments connected with “crypto” was certainly one such “distortion.”

The second reason for the “glow” around the crypto world was the fact that the crypto world was very early on associated with libertarian ideas of how the world worked.

The crypto world was seen by many as an opportunity to construct assets and build markets that did not have government regulation or control connected with the assets or the markets.

This was a very, very attractive narrative and the attention of many investors to what was going on.

In fact, I believe this narrative gave the whole effort taking place to build a world with less public regulation and control a special “glow” that attracted a lot of investors into the space.

And, so the crypto world got most of the attention when it came to talking about digital currencies and a digital financial system.

Well, it looks like those days are over.

Digital is the future of money and finance.

It appears as if the central banks of the world are on the verge of money heavily in this direction.

My guess is that commercial banks, especially the larger ones, are set to move on ahead with the central banks.

And, after complaining about how the central banks were lagging behind the rest of the world when it came to moving toward the digital future, we are going to wake up one day soon and see that the world is all digital.

Furthermore, we are going to say, “Wow!” this digital world is really something.