DIGITAL ASSETS - And The Effect Today

You can now download your money (say N500,000) into a USB Flash Drive and keep it.

This is what Nigerian Central Bank of Nigeria, and other Central Banks are racing to achieve.

Let me show you how it works.

Prior to internet & computer technology spread, the entire banking system ran on books and records.

If you have money, you take it to the bank in a location. They keep it for you, and you have to go back to the SAME bank branch and collect the money, except you transfer it, which takes days.

Computer technology came, and a few upgrades were made. You could now save your money in a bank branch and collect it in any branch of the bank.

Internet/App Technology followed, now we can interact with our money which is still in the bank and run transactions from our account to another.

Today, the world is taking it further, we’re moving from just having RECORDS of the money in our apps, to having the ACTUAL money, as a piece of software code, which can be downloaded, uploaded, split and transferred, just like any software file.

This is what Bitcoin is (more or less), and it is what CBDCs (Central Bank Digital Coin) will be.

Why is the world making this move?

It’s cheaper and more efficient to manage: The records are self-fulfilling, there’s far less need for third parties in any transaction (actually, no need for third party, like in sending a file, but regulations can be different). It is more fraud proof (in context), and chances of double spending will fade.

But it comes with its own dark sides.

An example is if you download your money and lost it or corrupt the file, it is lost forever. If you forget the password to the storage, it is lost forever. Hence we may still need WALLET apps, which will help us save this file (our money file) on their servers and give us access and abilities to use the money. We can request for a new password if we forget, just like any app (but may be more tedious, as it is a money matter). There are other dark side, nothing exists without both sides.

Another interesting twist is the fact that this move will make commercial banks as we know them today to become unessential. All CBDCs will be issued by the Central Bank directly, hence, you deal directly with the Central bank for your CBDC needs.

As I read earlier this week from a publication by the Green Investment Club, they listed five core ways this digital asset move will change the world:

1. Commercial Banking: Becoming obsolete.

2. The creation of DIGITAL FINANCIAL ASSETS: This means instruments like Bonds, Treasury Bills, Shares will become digital and digitally issue. The ORIGINAL copy will not be a paper document, but a piece of software that you can download, which cannot be duplicated. Yes, “copy and paste” won’t work. LOL.

Other DIGITAL assets not related to money are also being created - NFTs. Hence you can have a digital art work which is the ORIGINAL copy, even if you have several similar copies which only are “photo – digi – copies”.

3. World Trade: Settlement of transactions may shift from the US Dollar, which is currently the currency for world trade. The E-Yuan of China is seeking to achieve this with its trading partner countries. This means a whole lot in terms of world power! Also, transactions become faster and more efficient.

4. A Case for Emerging Economies: Central banks will no longer be able to fully implement monetary policies. What this means is that they can’t easily reduce/increase the supply of money or interest rate, because alternative coins will exist and be very prevalent. People will move to other digital currencies by simply downloading an APP! It’s weird today, but will become clear.

5. Trade Sanctions: Imagine Russia placing a trade sanction on China, today, that will be implemented by the banks in Russia, making it difficult to send and receive money from China. With Digital Currencies, there’ll be no need for commercial banks of any country to have a deal with people in that country. The citizens will only need a digital wallet to collect the E-Yuan and boom! Yes, the transaction is untraceable because the E-Yuan network is secured by the Central Bank in China DIRECTLY and won’t show their books to the country they’re at loggerheads with.

China is already testing this.

Nigeria is saying that by December 2021, we will know more.

You can do your own research, so that you won’t be shocked.

I’ve tried my best to keep it simple, avoiding the buzzwords like blockchain, non-fungibles, tokens, cold storage etc. This is meant for the simple man to have a glimpse of what is to come.

I also avoided Bitcoin, or any other Altcoin. This is not a case for any asset, but a discuss of the moves in the financial world as they happen.

Do you have other outlook, or things you think I missed out? Share in the comments.

The future looks bright!

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