Bitcoin’s star has been rising lately. The pioneering cryptocurrency bottomed out around $5,000 at the beginning of the pandemic in March, but this week traded above $13,800.
Helping to spur those moves is increasing corporate bullishness on cryptocurrency—as evidenced by Square’s recent $50 million Bitcoin buy and last week’s announcement that PayPal will offer Bitcoin and other crypto trading. Even J.P. Morgan is now predicting a coming liftoff for Bitcoin.
Cryptocurrencies like Bitcoin remain controversial, but their growing acceptance is likely also accelerating the arrival of their well-hyped cousin: Central bank digital currencies.
That was clear yesterday as I hosted the Fortune Global Forum, where I interviewed fintech leaders including Mastercard CEO (and soon to be executive chairman) Ajay Banga; Visa Europe CEO Charlotte Hogg; and Sebastián Kanovich, co-founder and CEO of dLocal, a Latin American payments startup that recently became Uruguay’s first billion-dollar unicorn.
While Bitcoin is too volatile for mass usage, said Banga, it’s “central bank digital currencies we’re believers in.” Mastercard is now “one of the largest patent holders in the space of central bank digital currencies,” he added.
“I believe that fiat currencies, if they were to go digital, would they be helpful in cross-border trading flows and improving the efficiency of those?” explained Banga, “Yes, for sure.”
Hardcore Bitcoin purists are bound to insist that any currency issued by a central bank is not a true cryptocurrency, because it’s not decentralized. But the CEO of Binance—the world’s largest Bitcoin exchange—Changpeng Zhao, better known as CZ, disputed that view when we spoke with him last week on our show Balancing the Ledger.
“People will probably argue about the semantics of it and different definitions of it, but I think that that’s not super important,” Zhao said. “What’s important is what will people use at the end of the day, and how much adoption each different currency will get?…I think there could be centralized versions of cryptocurrencies that will get high adoption.”
He added: “I think as long as people use it, it will have value.”
Indeed, even in emerging markets where local currencies can be volatile and less reliable, people still aren’t turning as much to cryptocurrencies as proponents perhaps thought they would.
Kanovich, whose company dLocal operates largely in Latin America and other developing countries, didn’t think cryptocurrency would matter much to his business until central banks got on board with the technology.
“We are super bullish at the personal level; we don’t count on it at the company level,” he said. “We need to make sure that the central banks are feeling comfortable.”
Besides, he added, even among the current fractured landscape of cryptocurrencies, with Bitcoin and its thousands of younger siblings, none has really caught on yet with consumers. “We need to make sure that users are paying the way they want to pay. And yet, they’re not choosing crypto,” Kanovich added. “We would love to see it happening, but we haven’t seen it happening yet, and we do believe we have other fights to fight than driving adoption in the crypto world.”
Maybe a digital currency backed by a central bank would change that.