Are cryptocurrencies purely speculative values, emanating from the evolution of the digital world or do they carry more fundamental attributes with the potential to eventually revolutionize the currency market, traditional banking systems, payment methods? What role will central banks play for themselves? No credible player can now turn their back on the emergence of this digital technology that allows both the creation of money and the management of financial transactions.

A cryptocurrency is a digital and virtual currency, used for transactions between users, members of the same network. To date, cryptocurrencies are private initiatives, largely independent of political and monetary bodies. They make it possible to make transactions, at insignificant costs, without going through the current banking system.

Bitcoin, a pioneer of cryptocurrencies, was created in 2009 and remains to this day, the most used digital currency with 50 million users and a capitalization equivalent to $ 350 billion. Market authorities do not recognize bitcoin as a currency, but as a cryptoasset whose value allows for trade. Bitcoin has been emulated by a number of emulators, including the Ethereum network: a platform shared by more than 1500 cryptocurrencies gathered around the same technology.

 Libra, now renamed Diem, is an initiative of Facebook, in partnership with 28 players in the financial and digital world, and which offers the potential to be used by more than 2 billion people, represented by the community Facebook . Unlike its predecessors, the value of libra is backed by a basket of 5 existing currencies. Its price should therefore be fairly stable: we are talking about a second generation of digital currency under the term stable coin. The emergence of this new global currency has had the effect of waking up financial authorities and central banks all over the world.

investment

The value of a cryptocurrency is floating against currencies and is a function of supply and demand in the foreign exchange market. The success being at the rendezvous, the bitcoin has experienced a spectacular growth multiplying its value by a factor of 100000 in 10 years (0.15 dollars / btc in 2010 for 15 000 dollars / btc in 2020). Not everyone got rich because the path was tumultuous, made of ups and downs. Volatility is a disease of youth, according to Jonathan Gross (1): "The growth in the number of users and the atomization of the market will eventually mitigate the impact of large holders". Nowadays, bitcoin is essentially an investment value: investors buy, put in portfolios and speculate on the rise. Cryptocurrencies, to become real means of payment, will have to divest themselves of this speculative side, assert themselves as an economic instrument and stabilize their exchange rate.

Banks and the Central Bank

Cryptocurrencies have the potential to simplify and divide the costs of financial transactions significantly; as such, these new platforms are positioning themselves as competitors to banks and credit card companies. But banks themselves have understood the potential of this technology to facilitate international transfers, simplify interbank clearing, provide transparency, reduce fraud, and reduce infrastructure costs. They will have to rethink their profession according to how they will integrate this technological revolution into their activities.

The potential of cryptocurrencies is also not lost on central banks. Digital currencies have this ability to create money, put new currencies into circulation, and thereby modify the money supply. The European Central Bank has understood the challenge by studying a digital euro, correlated with the monetary euro; a state digital currency thus constituting a third generation of cryptocurrency. China is the most advanced country in this area: the Chinese central bank is the first to announce its cryptocurrency, the Digital Yuan, developed in collaboration with the Chinese web giants. Countries such as Russia, Japan and Sweden are in an advanced exploratory phase.

Which currency for which future?

The evolution of society creates a favorable environment for the development of digital currencies: millennial generation, growth of digital commerce, decline in cash, questioning of intermediaries, internationalization of exchanges, interest in a supranational currency. While the first generation of cryptocurrencies could not escape significant speculative content, the wider adoption and evolution of technology will generate a new generation of more stable digital currencies, connected to the economy of goods and services and national currencies. These new stable digital currencies, linked to central banks, should increase the instability of private cryptocurrencies by competing with them on the attributes that make them valuable.