The International Monetary Funds on Monday released a report based on the activities of big tech companies like Facebook entering into the finance space to operate as financial institutions. In this documentary tagged “The Rise Of Digital Money”, IMF warned that these tech companies are most likely to leave banks behind in this financial struggles.
According to the report, the IMF believed that the future of money is going digital and other conventional forms of monies like cash and bank deposits are fast going extinct. As a matter of opinion, IMF, in the document insinuated that banks must learn to adapt to this new system of digital currencies like cryptocurrencies which are already filling the wallets of enthusiasts and being registered on the mind of regulators.
Blockchain Versus Traditional Banks
Digital currencies or electronic currencies or cryptocurrencies, terms which this news uses interchangeably, are fast gaining popularity and have caught the eyes and attention of regulators around the world, central banks, and several government offices including that of the United States President, Donald Trump.
As news about cryptocurrencies came to materialize, big tech companies like Facebook ventured into the ecosystem in order to explore it. Therefore, Facebook started building a unique, probably hybrid in terms of decentralization cryptocurrency project now commonly known as Libra.
With other big tech companies, large financial institutions, and credit card companies backing Facebook’s Libra, the project quickly rose to stardom within the crypto ecosystem.
Realizing the threat of disruption Libra posed to banks and present financial bodies and existing systems, regulators drastically moved against Libra. This combination of actions caused Libra’s development to be halted till date. Facebook is awaiting a Senate hearing on Libra this week.
Banks Must Evolve Or Be Left Behind
The report maintained that while these new fast developing set of currencies renders similar services as banks and financial bodies, their blockchains enable for faster transactions, the anonymity of users, cross border settlements, and transaction cost. In contrast, these are services which present-day banking bodies and financial systems are also rendered but less efficiently.
According to the report, banks must therefore evolve or be left out.
“Some will be left behind no doubt,” “Others will evolve, but must do so quickly.”
How Countries Responded
Many regions are reacting differently to this new development. A bill to keep big tech companies out of finance was passed recently in the United States and this makes it unlikely for Libra to be implemented in the region. India maintained its crypto involvement jail term and places like China and Venezuela are actively considering the issuance of a “national cryptocurrency”.
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