KPMG Discovers Coexistence of Various Digital Money Forms in Market According to Use Case
A recent analysis by KPMG suggests that multiple forms of digital money, including central bank digital currencies (CBDCs), stablecoins, and tokenized deposits, are expected to coexist in financial markets over the next decade. Rather than having a single dominant option, these digital money forms will exist side-by-side, with users gravitating towards the most efficient and automated solutions available.
KPMG gathered insights from discussions and digital asset-focused events it hosted, providing a comprehensive perspective on the current market outlook for digital currency, encompassing traditional financial institutions, fintech companies, and crypto-native firms.
CBDCs have garnered interest from central banks and governments, evident in widespread testing and pilot programs. According to the World Economic Forum (WEF), nearly all central banks worldwide, or 98%, are exploring the concept of digital currencies through research, pilots, or even launching their own currencies. While banks see potential in CBDCs for businesses (wholesale CBDCs), doubts remain regarding a widespread launch for consumers (retail CBDCs) due to economic and political uncertainties, as well as technical challenges that need to be addressed. Some participants argue that CBDCs lack clear advantages over existing digital options like stablecoins and tokenized deposits, which offer similar benefits.
Tokenized deposits are seen as an appealing option for banks, as they allow for experimentation and seamless integration with existing regulations. Participants expressed optimism about Distributed Ledger Technology (DLT) significantly improving traditional deposits, particularly in terms of faster and more automated cross-border payments, leading to cost reduction and new opportunities. However, the purpose of tokenized deposits was not unanimously agreed upon, with some questioning whether they would serve as digital cash or have a different role, such as collateral.
Stablecoins were identified as the most promising form of digital money, addressing specific needs. While initially used in speculative crypto trading, participants believe stablecoins have long-term value in established areas like cross-border payments. They are seen as a solution to problems in various industries, such as enabling instant settlements (T+0) through combined (atomic) transaction processes. However, concerns remain regarding government regulation, reserve management, and handling surges in withdrawal requests.
KPMG predicts that in the near future, more banks will offer tokenized deposit solutions and use stablecoins more widely. Additionally, CBDCs are expected to further drive the global growth of digital money in the coming years.