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Are National Currencies Headed to the Blockchain? Part 1: Setting the Scene

This is the first part of the thought leadership article series “Are National Currencies Headed to The Blockchain?” by Blockchain expert, Coinify Co-Founder and CEO Mark Højgaard.


In this series I will explore the main factors at play in the introduction of national currencies on the blockchain in the regulated finance industry. Furthermore, I intend to provide the finance community with a new approach to the concept of blockchain by analysing use cases of blockchain payments across different countries, governments and banks as well as theories of the adoption of radical innovations and new underlying technologies.


Blockchain technology is moving from theory to reality, and it seems to be happening even faster than many expected. The use of blockchain promises to bring along significant efficiency in financial transactions and financial inclusion in developing countries while eliminating the need for a trusted service provider and alleviating systemic risk and financial fraud.


The initiatives aim to achieve greater efficiencies and lower costs for several industries. As business owners, we cannot overlook these transformative opportunities that blockchain offers. During my years as CEO of Coinify, I have met with many obstacles for blockchain adoption. It seems that we are going from hype to anti-hype and back again. However, it still remains unclear when this underlying technology will overtake the existing technology and become part of our every-day life due to the complexity of the financial infrastructure.



The pace of digital disruption

The industrial disruption has been here for 30 years beginning with the introduction of the cellular network and the early days of the world wide web. Nowadays the pace of disruption gets faster especially when several existing technologies are combined to create a new technology or solution, which once again gets disrupted. Advancements in digital technology are strongly linked to the Moore’s law.


Figure 1: Moore’s law: the line corresponds to exponential growth with transistor count doubling every two years. Source: Gordon M. Moore “Cramming more components onto integrated circuits”


Moore's law national currencies

Moore’s law states that the number of transistors per integrated circuit will double approximately every 18-24 months becoming the underlying mechanism of the modern technological age. An example is the increase in computing power. Today a single device – the smartphone – is more powerful than all the set of devices just a generation ago.


 The digital disruption brings along the IoT, 3D printing, cloud computing, personalized medicine, alternative energy, virtual reality and ultimately blockchain technology. All these innovations form a unique ecosystem composed of complementary elements, which give a solid ground for a new technology to unfold. The complexity of the ecosystem makes it very difficult for us humans to predict when the new technology will take over the existing one and we often overestimate the speed of the adoption of a new technology in a short run and underestimate the mainstream adoption in a long run.  



Financial infrastructure has been slow to change

Compared to other sectors, such as media, advertising, travel and hospitality, finance has not yet experienced a strong wave of disruption based on increasing computer power and the internet. The largest financial firms today remain practically the same as they have been since 1950 when the cashless payment method was introduced by Diners Club International using a plastic card connected to your bank account. This was the first independent credit card company in the world.


The delayed transformation of the financial industry is owing largely to an abundance of regulation, which limits the ability to embrace innovation, making this ecosystem more difficult to disrupt. We need to consider that the financial industry is one of the most regulated industries, which limits its ability to embrace innovation. Furthermore, finance is complex, understood by few, math-centric and controlled by a few large banks or stakeholders. This kind of ecosystem is more difficult to disrupt.

Nevertheless, the technological developments and series of financial crisis call for a radical change in the financial industry: the introduction of the blockchain.


In my opinion, the following factors will be the major drivers for governments to issue national currencies on the blockchain:

– Payment regulations are changing

– Consumer behavior is evolving with new payment innovations

– Banks and governments are considering issuing national currencies on the blockchain


In the second part, planned for next week, I will touch upon the roles of the above mentioned factors driving the adoption of blockchain based national currencies.




This content originates from Forbes Finance Council thought leadership article and has been extended and elaborated for the purpose of publishing on this platform.




Image credits: fdecomite (Flickr) and WgSimon (Wikimedia commons)

Forbes Finance Council conducted an interview with Mark Højgaard to profile him as a new member and share his advice. Read the interview here.