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Cash to be a thing of the past as banks invest in crypto

Major corporations and governments are showing increased interest in the crypto market. Earlier this year consultancy firm PwC reported In its CBDC Global Index that more than 60 Central Banks have been exploring central bank-backed digital currencies (CBDC) since 2014, with some CBDC projects now entering implementation phases.

Further proof of this acceleration is Mastercard’s announcement that they have entered into an agreement to buy anti-money laundering company CipherTrace for an undisclosed amount. President of cyber and intelligence at Mastercard Ajay Bhalla said in a statement: “Digital assets have the potential to reimagine commerce, from everyday acts like paying and getting paid to transforming economies, making them more inclusive and efficient. With the rapid growth of the digital asset ecosystem comes the need to ensure it is trusted and safe.” According to CipherTrace their platform is used by some of the world’s largest banks and crypto exchanges, analysing transactions and helping businesses and law enforcement by ensuring they are legitimate. Mastercard has also said the deal will also help them to comply with regulations as they start to build out their own digital currency offerings, with Mastercard saying it will open its network up to select cryptocurrencies this year to compete with rival Visa.

The Bank of England has also indicated its interest, although it is clear that like many European countries the investment is lagging behind other countries such as the Bahamas, Cambodia and China. One reason for investing is that unlike commercial cryptocurrencies, which are decentralised and regulation-free, CBDCs are issued and controlled by the country’s central bank, offering the stability of physical cash with the convenience and security of crypto. In a speech given in June 2021 at the FS tech: The Future of FinTech Conferencethe Bank fintech chief Tom Mutton stated that they are a “thought leader”

“Clearly central bank money plays an important role; and even as transactional use of cash has declined, the public report that they still value their access to it. Therefore it is only right that we consider the case for providing central bank money, to the general public in digital, as well as physical form.” — Tom Mutton, Bank of England

Another reason for investing in CBDCs is political, with much of the interest due to governments and central banks wanting to retain control over monetary systems, with fear of decentralised finance but also of other governments. Eloisa Marchesoni, co-founder of blockchain consultancy Blackchain International, recently told Wireless: “China has already won the 5G race and is winning the CBDC race as well – that will affect the geopolitics of the world.”  What is clear is whether or not the Bank of England invests in CBDCs, cryptocurrency is here to stay and finance will never be the same.