German multinational investment banking provider Deutsche Bank has hit out at cryptocurrencies in its latest research report.
The bank has called the impact of cryptocurrencies and blockchain on macro and geopolitical spheres “profound” and warned of threats to international monetary stability.
The report looks at the increasing role of digital payments infrastructure in the world economy and identifies several areas of concern for fiscal policy makers.
Arguing that the general population has a deeply rooted trust in cash, the bank claims that digital payments will not be overtaking fiat currencies anytime soon.
Likewise, the researchers conclude that when it comes to privacy and security, cash is still king – arguing that it is impervious to cyber-attacks and online tracking.
However, the bank also note that there is a growing trend towards digital currency payments, especially with web-based service providers such as travel agents and telecoms companies.
As a result, the report argues that the cash “dinosaur” is “losing ground” as a payment method, citing the removal of large bank notes as an indication of fiat’s decline in popularity.
The report reads:
“Several countries have recently removed large notes worth $100 or more and implemented policies to replace traditional payment methods with digital solutions. In the midst of these changes, non-sovereign cryptocurrencies pose a threat to political and financial stability.”
CBDCs are a risk
The bank also highlighted the role of central bank digital currencies (CBDCs), especially those being developed in emerging economies such as India and China, as a danger to the current economic status quo.
The report states that China’s CBDC plans could undermine the US dollar, arguing:
“China is working on a digital currency backed by its central bank that could be used as a soft- or hard-power tool. In fact, if companies doing business in China are forced to adopt a digital yuan, it will certainly erode the dollar’s primacy in the global financial market.”
This comes as China has made huge strides forward in implementing a national CBDC, leaving many other nations to catch up.
The report concludes that in the not-too-distant future, countries may be able to trace their economic status on the world stage to the decisions they made regarding digital asset adoption.
This has led some experts to claim that the race for a globally recognised digital currency is akin to a new space race.
You can read more about CBDCs here.