Decentralization

1. The US dollar loses its pre-eminence Today’s centralized global monetary and financial system – featuring a dominant US dollar – mutates into a world with multiple reserve currencies and financial powers of influence, mirroring the shift from the British pound to the US dollar as the reserve asset. As economic importance traditionally leads financial and monetary pre-eminence, the euro and renminbi are likely to gain importance alongside the US dollar and increasingly meet the world’s demand for the reserve currencies and safe assets. 

2. Decreasing use of paper money Digital money – issued privately or by central banks – and decentralized ledgers proliferate with implications for monetary and financial policy-making. In countries, where changes are rapid, the growing fintech industry is providing specialized financial services using a range of digital innovations, including those that supply credit and payments services to households and businesses through online platforms. Acceptance and adoption of cryptocurrencies will continue to spread. These developments will bring together markets, institutions and infrastructure in a multi-polar, complex and interconnected world, which will challenge the conduct of monetary policy and have implications for financial stability. 

3. Traditional bank business models will be challenged Fintech will transform traditional banks and insurance companies, with the emergence of newly decentralized entities providing liquidity and new financial services in a disintermediated way. The development of new technologies will create new asset classes that directly match savers and borrowers and foster risk mitigation through the commoditization of financial data but also lead to more fragmentation and dislocations.

READ More ...