The traditional financial system is going through an unprecedented overhaul in the next 2–3 years. Coronavirus and the covid induced economic recession and depression that may follow are and will continue to globally cause record levels of debt, stimulus payments potentially leading towards universal basic income being adopted throughout many countries.
However, these solutions are a short-term bandaid and they imply the collapse of our monetary systems globally. Central Banks cannot print unlimited money forever without causing inflation or currency debasement. For example, if the Federal Reserve keeps stimulus money flowing, unfortunately, the US dollar will debase, inflate or lose value.
Since the Federal Reserve, Central Banks globally and Central Bankers have no option near-term in the next few years but to continue inflating debt-cycles, they are already planning on transitioning to a new system of Central Bank Digital Currencies (CBDCs). This won’t happen all at once, but this marks a shift to a cashless society from even the traditional banking system itself.
We were already moving towards more and more P2P (Peer-to-Peer) options in fintech as we saw with the rise of cryptocurrencies such as Bitcoin, mobile payment options such as Square, Venmo, Paypal, CashApp.
However, what was once thought of just as the fantasies of Cryptocurrency or Gold Libertarians, with the potential coming debasement of the US Dollar and the rise of the value of reserve assets or digital assets such as Gold, Bitcoin is now entering the mainstream of thought in finance and technology circles.
It will soon enter the mainstream of thought in general as these ideas pick up steam and permeate the narrative of the coming shifts in global macroeconomics, finance, technology, commerce, business and society as debt-weary big banks, corporations, big investors, retail investors and younger generations such as Millennials look to a store of value or reserve assets as a hedge against inflation.
Placing all value in Bitcoin, blockchain and creating value in digital assets will mean more and more regulatory scrutiny contrary to consensus belief that bitcoin, cryptocurrencies are used mainly for fraud and criminal activity. Most cryptocurrencies including Bitcoin with the exception of perhaps Monero are highly traceable and more traceable than cash or dollars. When governments get involved with digital assets such as their moves toward Central Bank Digital Currencies (CBDCs), they will actually have an easier time tracking down criminal activity.
Now, traditional cryptocurrency libertarians will not be happy with this and in fact, the moves toward a more cashless society, controlled and regulated by governments and central banks, mean that individual privacy and liberty will become increasingly constrained as large governments and corporations gain more control over the infrastructure of commerce.
Big Tech corporations such as Facebook control and monitor our data and our online interactions. Central Banks will monitor our financial interactions as well.
What’s interesting is Facebook, a big technology corporation’s move to a stablecoin — Libra. Facebook controls large swaths of the digital or attention economy and they are seeing a move toward controlling integrated fintech payments within their platform also. Although Facebook is facing regulatory battles currently, who knows what happens in the future with their stablecoin. It will probably be integrated into their platform.
Central Bank Digital Currencies would also represent a move from Central Banks to have more control and surveillance over our financial activity. What’s more interesting than the privacy and control side of this analysis, however, is the side of analysis where they compete with open-source cryptocurrencies such as Bitcoin.
The dynamics will be very interesting to watch in the coming months and years as this is not just a battle over the future of fintech, but arguments over control and power itself over money, the infrastructure of money, the internet of value, and centralization vs decentralization.