The IT company IBM is conducting a study on the “future of money”. The technology group looks at the various fields of application of distributed ledger technology (DLT) and focuses in particular on possible innovations in the financial sector by Bitcoin & Co.
“Programmable Money: Will Central Banks take the Lead? is the title of a white paper published by the IBM Institute for Business Value in January 2018. In it, the authors Jed McCaleb, Lindsay Lin and Jesse Lund examine future fields of application for blockchain technology as well as digital currencies and what role central banks could play in a broad adoption of Bitcoin & Co.
The role of banks
According to IBM, banks will continue to play an important role in the financial world in the future. As an intermediary that assumes the functional tasks of the financial sector, banks will still be important even if cryptos are widely accepted. According to the paper, they ensure a coordinated flow of liquid funds and thus bring lenders and borrowers together:
“Although the principles of digital money are valuable and achievable, banks will continue to play a key role in the global financial system and in the economy created by the institutions.
The role of central banks
The debate over digital money has not left the central banks unscathed either. Prominent Bitcoin sceptic is the general manager of the Bank for International Settlements, Agustín Carstens. The Bitcoin opponent calls the mother of crypto currencies “a combination of a bubble, a Ponzi system and an environmental catastrophe”.
The IBM paper takes a less polemical position in this respect. It even discusses possible central bank crypto currencies, so-called “Central Bank Digital Currencies” (CBDC). According to the paper, the positive effects of these CBDCs are the prevention of money laundering and corruption as well as the reduction of friction losses in transactions.
The Swedish risk bank seems to be moving in exactly this direction with the e-krona.
Financial inclusion of developing countries
The authors also discuss the debate about so-called “remittance costs”. Although there have long been technical solutions for low-cost remittances abroad, the fees are still significantly higher than for domestic transfers.
IBM is setting a good example: as the tech company announced in October 2017, IBM is cooperating with the Stellar open source platform. The cooperation’s goal is to be able to make inexpensive transfers across national borders. Supporters consider the Stellar open source platform to be suitable for such efforts, as the Ripple spin-off is considered one of the fastest blockchain platforms ever.
Stellar is not directly mentioned with a single word. The passage in the research paper about the financial inclusion of developing countries can, however, be seen as an indication that the project is still being driven forward.
Conclusion: Crypto bull IBM
The bottom line is that blockchain technology has become indispensable in the financial sector as well. The triumph of the leading power Bitcoin has shown that digital currencies can make a considerable contribution to generating trust, transparency and security. In addition, the possibilities of financial inclusion of developing countries are numerous and so far hardly exhausted.
Thus the report ends in the highest tones for the DLT:
“The future of programmable money is dawning. While the introduction of blockchain is still in its infancy, it offers enormous potential to revolutionize the global financial system. No place on earth will be out of reach.”
That should be music to the ears of Hodlers and bulls.
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