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What impact will digital currencies have on our banking and financial system?

When the issue of digital currency is discussed, two topics must be distinguished.

The first topic is the one that receives the most attention in the media and financial spheres. These are cryptocurrencies and bitcoin, and more specifically the question of their regulation. Paradoxically, observers have come to realize that bitcoin is not widely used as a transaction currency (although there is little data to support this), but more for reasons of store of value or speculation. What are the risks that can be borne by economic actors who accumulate this new form of asset? Should the State intervene vis-à-vis these risks as it does for all other types of financial assets? 

The other regulatory issue, which is not specific to the issue of bitcoin, is that of fraud. This point proved to be important because it is an unregulated sector. Although the fintech sector seems very innovative, the questions posed are not that new. These are classic subjects of financial regulation, with a very strong reflection on the internationalization of assets from the outset. How can countries agree to regulate this? In my opinion, it is necessary to adapt financial regulation to new products as for all financial products. Moreover, crypto trading continues to grow, along with the emergence of platforms that make it easier, for example the Ethereum Code.

The other question is: what to do with the disappearance of paper money? Often we hear that the two issues are linked and that bitcoin would replace paper money. This may be true for fraudulent or opaque sectors, on which there is little information. For example for drug lords who used suitcases of dollars before and will now use bitcoin. Except in these extreme cases, economic actors, individuals do not use bitcoin as they used banknotes.

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Other uses, such as payment by credit card or by telephone, encourage the replacement of banknotes by digital currencies. From a historical point of view, this problem is more unprecedented because we have never operated in systems where there was not a material form of money. The possibility of such a system raises two questions.

First of all, if transactions are only made using digital currencies, then there would be no more anonymous transactions in the form of the banknote. What about anonymity? Then, how to allow everyone access to digital currencies? In the monetary field, there is recognition of the need for citizens to have access to anonymous transactions. In fact, the role of the state in this process raises questions: should it provide digital monetary forms that guarantee anonymity and accessibility as strong as banknotes?

In current developments, where do we stand regarding anonymity and universality?

There are several methods to anonymize transactions. For the moment, this concerns purely private currencies and without a stabilized guarantee. It is the current duality between anonymity or stability, which remains guaranteed by the State. Some people often question the need to protect the anonymity and accessibility of the current monetary system. From a theoretical point of view, the functions of money, anonymity and universality, are very important. Two postures can then be adopted: either we decide to recreate monetary forms that will guarantee these functions in a virtual way; or we get rid of it by arguing that it is historically situated and useless today. China often serves as a case for discussion in this regard since the development of digital currencies affects the entire population without preserving anonymity.

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To arbitrate, it may be useful to look at the needs of society and to understand to what extent economic actors and citizens are aware of these functions, which is really complicated. Few people realize what the difference is between a single, universal currency and a bank-managed currency. Regarding the universality of central bank digital currency, the idea would be for the central bank to open an account for every individual, including people excluded from the banking sector. 

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