• The end of fiat currencies is an unavoidable change

  • The demise of fiat currencies is unavoidable, and they will be replaced by digital currencies. Traditional finance and banks have no choice but to prepare for and embrace change.

    This is a very common sentiment among financial services professionals.

    Deloitte confirmed this in a recent survey, but it is worth delving deeper to understand how it will occur.

    How will digital currencies replace fiat currencies?

    According to a Deloitte survey, the majority of people in the financial industry (76 percent) are fairly certain that digital assets will replace money as we know it in 5 to 10 years. The proportion of pioneers who believe in this hypothesis is as high as 94%.

    While we wait for this to happen, the industry is changing dramatically, with services related to digital currencies emerging.

    It’s no surprise that 45 percent of survey respondents say they’ll provide digital asset custody services. 42 percent are willing to adapt to new payment channels. Furthermore, 41% of respondents plan to take advantage of the digital revolution by diversifying their investment portfolios.

    Digital asset custody

    The most obvious concern for those in the financial solutions industry is the provision of digital asset custody. This is where the paradigm shift occurs, because the industry is being asked to provide something that did not previously exist, which necessitates new infrastructures and procedures.

    Banks, in particular, are being asked to make this effort. Banks must compete with cryptocurrency exchanges, wallets, and other services, and if they are not to fall behind, they must provide cryptocurrency services that make the user feel satisfied and secure.

    Payment systems are evolving.

    Financial industry participants understand that the true revolution in cryptocurrencies and digital assets in general is primarily linked to how payment systems are changing. This is especially noticeable in cross-border payments.

    While $2 trillion in fees were recorded in 2020, Deloitte predicts that with the advent of digital assets, these costs will decrease.

    These services are likely to become free or with minimal commission costs. Above all, they will arrive outside of the traditional banking system, between the sender and the recipient.

    The Function of Banks

    Banks cannot afford to sit idly by in this situation. According to Deloitte, banks are among the largest depositaries of patent applications for digital asset and blockchain technologies.

    This indicates that banks are venturing into new territory and putting themselves at risk in order to meet the needs of their customers. But it’s not just a passive adaptation: banks are realizing that blockchain can open up new opportunities.

    All of this will be determined by the laws enacted to regulate the sector, despite the fact that the financial world appears to be optimistic in this regard. There is also the issue of security.

    However, the path is set, according to Deloitte:

    “Banks have no choice but to accept change. Participation in the digital asset age is not an option; it is unavoidable. Leaders must only decide how and when to launch their organization – and how to best leverage digital assets and the new global financial service infrastructure.”

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