Darrell Duffie, a professor at Stanford Graduate School of Business, says that over the next 10 years, cryptocurrencies will ruin the business model of banks, depriving them of the unforeseen high returns that they now receive from low-interest deposits.
Professor Duffie said that the public should not be deceived about the relatively small amounts of cryptocurrencies use such as bitcoin. Also, do not take the attempt to refuse the use of the Libra Facebook cryptocurrency as a ban on large private initiatives.
“The future is already approaching, and it is causing great damage to the outdated system of banks that do not want to participate in this” – he said.
Will it be a stablecoin supported by the dollar, a Facebook product or a digital currency of the central bank, the advantages of using the digital asset model will cause banks to lose access to profitable deposits at low interest rates over the next 10 years – he said.
“The new reality will lead to increased competition for deposits. If consumers get faster ways to pay bills, and traders get faster access to their sales revenue, they will not need to store so much money in accounts with extremely low interest rates” – he added.
As noted in the report, consumers and businesses store about $ 14 trillion in deposits only in US banks that pay an extremely low interest rate.
Banks pay less than 0.1% on savings accounts and a slightly higher rate on annual certificates of deposit. At the same time, the amount that banks receive from ordinary overnight loans increased from 0.3% in 2015 to 2% in 2019.
This dependence on deposit accounts of the vast majority of the population brings huge profits to banks. In addition, banks charge high fees for credit card providers.
Various models of future central bank digital currencies may also evolve bypassing commercial banks, at least with regard to the payment process.
And if the private sector begins the widespread use of cryptocurrencies, this will have a huge impact on their status quo.
He argues that the current system is unstable, that technology, economics and social pressure will deprive banks of control over the global payment system.
“The smartest banks will be ahead. Others will only be reluctant to absorb their very profitable franchises” – he said.
He also warned those banks that are rebuilding rather slowly: “The future is coming, and it is not very pleasant.”