The_Future_of_Payments_Series_2_-_Part_II__When_di

Deutsche Bank Research PositiveImpact Part II. When digital currencies become mainstream Marion Laboure, Ph.D. Research Analyst 44-207-545-0679 The Future of Payments Series 2 P o w e r e d B y D e u t s c h e B a n k D a t a I n n o v a t i o n G r o u p P o w e r e d B y D e u t s c h e B a n k D a t a I n n o v a t i o n G r o u p dbDIG Corporate Bank Research February 2021 DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCIP 064/04/2020. DURING THE PERIOD NOVEMBER 2018 to MARCH 2020 DISCLOSURES MAY HAVE DISPLAYED INCOMPLETE INATION, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS. The one thing that’s missing, but that will soon be developed, is a reliable e-cash, a whereby on the Internet you can transfer funds from A to B without A knowing B or B knowing A. - Professor Milton Friedman 1999, Nobel Prize winner Deutsche Bank Research / The Future of Payments Series 2. Part II. When digital currencies become mainstream 3 3 Summary on a page A year ago, we stated that − Cryptocurrencies would become more mainstream. Both Facebook and PayPal will be adding cryptocurrency capability to their wallets early 2021. Facebook plans to launch Libra 2.0 in early 2021. With over 2.7 billion users one-third of the world’s population, Facebook now has the potential to compete with traditional online payment plats and advance digital currencies into the mainstream. PayPal plans to further expand the roll out internationally and to the rest of its plat including Venmo in 1H21. This is a big development for crypto adoption, because PayPal is one of the biggest payment providers in the world. PayPal services are being used by over three hundred million customers worldwide. Twenty-eight million stores now accept PayPal as a payment . − Central bank digital currencies CBDCs will be widely discussed. The Bahamas launched the first nationwide CBDC last October, and both Sweden and China launched pilots in early 2020. This year, we see that − The pandemic has hastened the decline of cash by four or five years. The world has shifted from asking whether digital currencies will succeed, to how and when they will become mainstream. − Using cryptocurrencies for payments will accelerate. Energy consumption could hinder widespread use of cryptocurrencies and create negative press. Transaction speed remains low for most cryptocurrencies compared to card providers. The only exception is Libra, which is expected to run on FastPay. Libra’s transaction speeds could surpass Visa by fourfold. − Central bankers and policymakers will react by speeding up their existing research and launching pilots. China is likely to continue to dominate the race. In the long run, CBDCs will displace private cryptocurrencies and become the norm. Deutsche Bank Research / The Future of Payments Series 2. Part II. When digital currencies become mainstream 4 4 1. Big tech, fintech, and banks are leading cryptocurrencies into the mainstream “[Libra] w