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Are National Currencies Headed to the Blockchain? Part 2: Drivers for Issuing National Currencies on the Blockchain

This is the second 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 Part 1, I explored the pace of digital disruption and the slow developments of the financial infrastructure. In this second part I will touch upon the roles of the main factors driving the adoption of blockchain based national currencies.


As discussed in Part 1, the technological developments and series of financial crisis call for a radical change in the financial industry – the introduction of the blockchain. I believe that the following factors will be the major drivers for governments to issue national currencies on the blockchain:


1. Payment Regulations are Changing

When it comes to the regulatory space, the Revised Payment Service Directive (PSD2), recently issued by the European Commission may be the first step toward major change (see whitepaper). This directive will allow bank customers (both consumers and businesses) to use third party providers to manage their finances and thus enable new companies to arise. Any fintech company that can be agile and user-friendly while saving time and cutting costs can be successful. To this end, the industry will experience many new partnerships between startups and banks, as well as mergers and acquisitions among the largest players. Furthermore, these will create opportunities for banks to become more agile and customer-centric.


2. Consumer Behaviour is Evolving with New Payment Innovations

Consumers are the biggest beneficiaries of fintech innovations. Cashless and mobile payments are increasing all over the globe, as smartphones and other online devices facilitate shifts in consumerism. New solutions from software and hardware mobile providers, such as Apple Pay, Samsung Pay and Android Pay, allow consumers to have data and information at their constant disposal, and enable them to send or receive money with just a few taps or swipes. New alternative payments have changed the user mindset from being loyal to the traditional banking product to choosing payment solutions by emerging fintech companies. Consumer behaviour plays an important role in the adoption of the blockchain technology.

With the proliferation of fintech companies pushing the boundaries of the traditional finance space, many consumers became proficient users of digital payment services. These experiences create a solid foundation for the widespread adoption of national blockchain based currencies — the next step in the evolution of payment systems.


national currencies


3. Banks and Governments are Considering Issuing National Currencies on the Blockchain

Several leading countries around the world, including the U.K., Russia, Canada and China, have already been experimenting with placing their national currencies on the blockchain.

However, some of the best examples can be found in the developing world: Tunisia issued Tunisian e-Dinar, which is an virtual currency ran through the Tunisian post. Following Tunisia’s example, Senegal became the second country to introduce its national currency on the blockchain, eCFA.

I think we will see many African countries being early adopters, since this market offers a fertile ground for fintech solutions, especially due to the potential to solve problems related to financial inclusion, high cross-border transaction costs, remittance and corruption. We could learn a lot from these countries by reviewing their processes of blockchain based currency adoption.

Asia, with fintech hubs in Hong-Kong and Singapore, has also been taking the lead in adopting their blockchain based currencies. Other Asian countries do not lag behind. Japan’s attitude towards cryptocurrencies has softened after recognising Bitcoin as a legal payment method. South Korea is doing systematic groundwork for the adoption of blockchain based national currency, including joint investment with Singapore to create blockchain friendly business environment. People’s Bank of China also plans for issuing blockchain based national currency. To this end, a new civil law that will recognize chinese citizens’ legal right to own digital assets including blockchain based currencies was proposed.

The Asian region has been a major adopter of mobile internet and experienced tremendous growth in e-commerce sector. I think that the socio-economic landscape makes it a perfect place for blockchain payment innovations.


The world is moving towards the use of digital currencies

Banks themselves have begun to experiment with digital currencies rather than wait idly to be swept away by the tide of technology. They have realised the need to participate in the blockchain adoption in order to stay connected with their customers in the long run. Even traditional banks, such as Citi, Santander or Goldman Sachs, admit that they need to adopt blockchain into their strategy since this technology provides a more secure way of storing money digitally rather than physically.

In my opinion, banks need to be even more active in addressing these changes, even see it as an opportunity to redefine themselves. I foresee many new partnerships between start-ups and banks, as well as mergers and acquisitions amongst the largest players. Scandinavia, characterised by its efforts to eliminate cash,  is among the regions most ardently following the blockchain path.

Next week I will conclude the series with the key steps necessary for the mainstream 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.