The world of innovative technologies never stops evolving, and with it comes new solutions to drive efficiency and effectiveness. Interestingly, the financial industry is not left out of the evolution, as several moves are being made by different financial institutions to adopt cryptocurrency and related technologies. One financial institution that has been vocal about cryptocurrency, is popular investment bank J.P. Morgan Chase.
The investment bank believes that we have gotten to the point where the world is may have no choice but to accept and adopt the use of private money. In a report that was sent out at the weekend, J.P. Morgan Chase made a statement that clearly meant that the world is ready to accept private money. Just in case you have no idea what ‘private money’ is, it simply refers to currency that has a private institution behind its issuance. Interestingly, an argument has been going on for a while about fiat currencies, and some believe that the influence of fractional reserve banking on the private issuance of fiat currency makes it private money too.
If we take a close look at the financial systems of different countries in the world, you will realize that private issuance of fiat currency is what all the countries do; however, there is a monopolization of fiat currency issuance by governments of different countries. According to the report from J.P. Morgan Chase, emphasis was placed on the role and significance of stablecoins in the grand scheme of things. Interestingly, the report also had something to say about traditional crypto, citing that their increased volatility was a factor to consider, as it was preventing cryptocurrencies from experiencing mainstream adoption. The report also mentioned that crypto’s role was largely based on its function as an asset to aid and facilitate hedging and the diversification of investment portfolios.
According to J.P. Morgan, stablecoins that have the support of financial assets are in a better position to be accepted as mainstream units, and if that happens, traditional fiat currencies may have a rivalry that may not be too easy to deal with. The financial institution also believes that for these stablecoins to get issued, then the issuers may be faced with the hassle of going through series of regulatory tests and scrutiny. J.P. Morgan was reported to have said that the privilege attached to the issuance of private money, usually have compliance obligations and regulatory requirements to deal with.
The report further added that having the validation of transactions performed if we relied on a centralized system, could help in maintaining the ledger’s integrity. However, the distributed ledger technology (DLT) has more benefits.
Indeed, private money may be the next rave that will have everyone involved in it. But as with all systems, there are different challenges to take care of and overcome, in order for the project’s vision to come to fruition, and thus right the wrongs of flawed traditional crypto transactions. We anticipate the future, which is just around the corner.