Recent research conducted by Deutsche Bank accords that fiat currencies are likely to be wiped out by the year 2030. Deutsche Bank strategist Jim Reid has also written about the challenges faced by fiat money in the report titled Imagine 2030. He asserts that people have in the past few years laid preference on the dematerialized form of money over traditional fiat money.
Reasons Behind the Replacement of Fiat Money: Downsides and Challenges
In the Imagine 2030 report, Reid discusses the unstable nature of fiat money. He also mentions how finance backed by commodity is not being preferred anymore over the dematerialized form of finance. It is being surmised that fiat money has it’s bearings on instability and hence is not genuinely trustworthy.
Fiat money has been in existence since times immemorial but now poses multiple challenges as the world is becoming increasingly fast paced. Fiat money is prone to inflation and is consistently tempting in the creation of money.
Challenges in Mainstream Adoption
While plans are being designed to replace fiat money with currency absolutely digitalized, the scenario still is far from being utopic. Reid who wrote in favor of digital currency or the decentralized forms of currency in the report also fears the mainstream adoption of money that would be along its way. He agrees with the factual challenges of such development; like the dependence on electricity, cyber-attacks and digital wars to name a few. He says:
“As that occurs, the line between cryptocurrencies, financial institutions, and public and private sectors may become blurred.”
CBDC Not Entertained in Certain Countries
Central bank digital currencies are being introduced by the central banks of various countries like China and France. However, Haruhiko Kuroda the governor of the Bank of Japan has expressed his dissent on such plans. According to him, the general mass still prefers transaction using cash than digitalized money. Legal research is still being conducted surveying the demands of the general mass which will shape the future of digital money.