Let's see how many of my predictions turn out right. Might take awhile though and perhaps I may have forgotten this post by then heh. Remind me in 2040.
Prediction 1: Digital currencies will first co-exist alongside physical currencies, and then eventually replace it altogether.
Digital currencies are really just the next step in a cashless society. Five years ago, paying everything with mobile only was still a pretty wild idea, it was a pretty revolutionary concept that only has widescale adoption in China. Today, people walk around without their wallets. Transfers are done via paynow, no counting of change required. With things like google pay, even physical credit cards are not essential.
At some point in time, there simply isn't a need for physical cash. If all cash is going to be stored in bank vaults and the only real movement is transaction records, it makes perfect sense for cash to fully become digital. It will take awhile because there will need to be a robust system built to manage this, perhaps leveraging on blockchain similar to cryptocurrencies. It's not just the central banks, financial institutions also must have the capability to manage this new system, and consumers will have to adopt it as well.
Unlike cryptocurrencies as we know it today, it will be a regulated system. Money supply will be controlled by governments, and when governments need to exercise monetary policy, instead of physically printing more monies, they simply create new digital dollars. It will be the same as cash today but digital.
Physical cash will still be around as there will be people who still use it (eg. elderly), but it will be smaller and smaller portion until it eventually completely phases out.
Prediction 2: Central banks and institutional banks will evolve but largely play similar roles
Introducing of digital currency will not make banks redundant as the video above might suggest. In fact, I suspect the roles will largely be the same. Central banks will be the regulator and the owner of the ledger. Central banks will have data of all transactions because they own the system that the digital currencies operate on. However, they don't own all the digital cash on it, just like how today all monies are not owned by the central bank.
Institutional banks will no longer need a physical vault to store their cash. They will have a digital vault (aka a giant digital wallet with additional functions). They will continue to perform their functions as they always do, just with digital currency instead of physical.
Prediction 3: A non-governmental currency will eventually become a currency for real
Proponents for cryptocurrency often talk about how it's a system that exists outside of government regulation and speak of it as if that may be a good thing. I disagree. However, I do think that governments too are imperfect, and so there exists a space for a neutral, non-governmental currency.
This is especially the case if digital currencies become the norm, allowing governments to gain access to detailed information. The 'financial surveillance' capability by governments will certainly become a privacy issue. Individuals may be spooked by it, or in certain countries that capability may be an actual threat to human rights.
Distrust in governments due to privacy concerns, as well as general distrust in government when it comes to managing monetary policy may lead to a sizable number of people taking on a non-governmental currency. Similar to how for countries where their own currency has failed, they often adopt another country's currency as the medium of exchange.
I don't know exactly what form this new digital currency would take, but I suppose it would be something in between what a cryptocurrency is like today and the digital currency of the future. There will be some regulation and oversight, but the control governments would have would be similar to the kind of controls any government has over foreign currencies today - rather limited. For this currency to work, there will be a system built into it to automatically allow for greater stability so it becomes a viable medium of exchange. What form that system takes I cannot predict. Off the top of my head, it could be something like a stablecoin, pegged to a basket of other global currencies.
This currency perhaps will remain something niche used only for specific purposes and in certain places. Or it could become the de-facto currency of the world though like how US dollar plays that role today. I don't know what level of influence it would have on the world, I just think it will exist and a sizable number of people will actually use it.
Prediction 4: That cryptocurrency is not bitcoin
Don't think I need to say more about this after my earlier posts about it.
Bitcoin will still be around though. I don't know how much it will be worth, but it will be a speculative asset that is here to stay, simply because people have poured too much into it for it to become completely useless.
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