It is no more news that central banks across the world are looking to roll out their digital currency. According to Bloomberg, the Chair of the U.S. Federal Reserve, Jerome Powell said that the world should expect a future where digital currencies and cash will coexist.
Digital Currencies to Co-exist with Fiat in the Future
Powell said that the Central Bank Digital Currencies (CBDCs) could be a better alternative to cash in terms of settling funds due to its traceable nature. The statement comes amid the increasing demand for cryptocurrencies by institutional investors. A few days back, Powell had made a positive projection about the economy which sent the stock markets higher and also caused a rise in Bitcoin price.
The Fed chair cited a report on how the Bank for International Settlements and seven other central banks have accessed the viability of CBDCs. The report revealed how CBDCs can help central banks focus on delivering their public policy goals. Powell said that one key principle highlighted by the report is the need for digital currencies and fiats to co-exist in a “flexible innovative payment system.”
Will Digital Currencies Push Out Bitcoin and Other Cryptocurrencies?
While there is a growing interest in Bitcoin, many investors see it as a hedge against inflationary fiat currencies and also a store of value. A recent report from the Deutsche bank says that Bitcoin has become “too important to ignore.”
The market cap of the flagship cryptocurrency is near 1.1 trillion, about 10% of gold’s, and is likely to keep growing. Although Bitcoin’s price has dipped following the $60,000 ATH, it is currently hedging towards that same level.
According to a report, about 30% of millennials hold the view that cryptocurrencies may later replace fiat as a means of payment. While the public sentiment about Bitcoin might affect future legislation, it is impossible to predict the outcome of events. However, considering the growing interest in Bitcoin, digital currencies may go alongside cryptocurrencies and Fiat.