The latest cryptocurrency news show that digital currencies have gained prominence over the last few years and analysts are now predicting even brighter things for the future of crypto. According to an IMF economist and the chief of the economist International Monetary Fund Gita Gopinath:
“Improvements in payment technology may have lowered the cost of switching from cash to digital payments, but there is little evidence they have done much to reduce the expense of moving among currencies.”
As Gopinath noted in an opinion piece for the Financial Times on January 6, “widely-held perceptions of the dollar’s safety and stability have kept it dominant in the international monetary system for decades.”
Meanwhile, in June 2019 Facebook released a whitepaper for its 2020 stablecoin which was in the Libra news. The Libra digital asset would be backed by a bundle of financial assets and currencies. Since then, the project has been met with significant regulatory backlash.
In addition to this, countries such as China have also stepped in the ring and are looking to release their own national digital currencies. As the IMF economist wrote:
“While these are intriguing possibilities, they are improbable in the near-term.”
When it comes to rationale, Gopinath mentioned the US dollar’s prominence in trade and banking across the globe – and to an ever-growing increase in USD usage which acts as a domino effect of sorts.
The IMF economist compared digital currencies to the Euro which has not been able to overtake USD and noted the vast number of aspects contributing to the success and dominance of a national currency.
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She also pointed towards institutions and investor safeguards held within the US dollar, increasing its strength.
In short, the IMF economist made it clear throughout her article that there are a lot of complicating factors that stand in the way of a digital currency that is looking to replace the US dollar. This situation may soon be tested as IBM predicts that a central bank digital currency (CBDC) may come within five years from now.
All in all, the IMF economist has a nice outlook on the future of crypto and especially the concept of national/domestic digital assets.
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