Looking ahead to 2026, we can expect steps forward in several key areas, notably in the global stitching of instant payments and the maturation of digital currencies and AI, converging to redefine what is possible in financial services.

Modernising messaging beyond compliance

The official retirement of SWIFT’s MT format in November 2025 finally came to pass. Now, the challenge moves from achieving basic compliance to truly taking advantage of the structured data power of ISO 20022.

The long-awaited full potential of granular remittance information, enhanced compliance metadata, and superior reconciliation, remains untapped if back-office legacy systems and correspondent relationships aren’t fully modernised.

In 2026, the industry focus will move beyond basic technical compliance to fully operationalising the ISO 20022 standard.

Organisations must update back-office systems, legacy infrastructure, and correspondent-bank relationships if they are to unlock the full potential of the richer MX data.

This means moving past mere format translation to leveraging structured remittance details and cleaner compliance metadata for tangible benefits, such as superior transparency, automated reconciliation, and enhanced regulatory reporting.

To achieve this, institutions require flexible, adaptable platforms that will enable them to go beyond a mandatory regulatory transition and find strategic opportunities for data-driven innovation.

Instant payments go global

The domestic instant payment revolution, led by systems like India’s UPI and Brazil’s Pix, is now entering its cross-border phase, with initiatives like the Bank for International Settlements’ Nexus project designed to standardise the way that instant payment systems connect to each other.

Rather than a payment system operator building custom connections for every new country that it connects to, the operator can make one connection to the Nexus platform.

We are entering a world where moving fiat currency across borders can be as seamless as sending a domestic payment, potentially in seconds and at low cost. This disrupts traditional correspondent banking and creates opportunities for businesses and consumers alike.

AI moves from experimentation to integration

There is a spread when it comes to organisational readiness for AI and many are moving out of exploration and into implementation, albeit via piecemeal pilots in many cases.

Seventy-two per cent (72%) of enterprises are making AI a top priority and increasing their investment by almost a third in the next year according to recent Red Hat data, yet 7% still aren’t generating customer benefit at scale.

In 2026, I expect to see a significant rise in the deployment of targeted AI use cases within payments, and I hope to see organisations moving away from silos and towards a unified platform that is accessible for all teams and can offer the consistency and control needed to build, deploy, and manage AI with any hardware, any model and any cloud.

For more than 90% of respondents to our survey, enterprise open source is part of the solution here.

In the coming months, Agentic AI will begin to move beyond proofs-of-concept into areas like intelligent, self-optimising payment routing and sophisticated, real-time fraud detection systems.

The focus will be on smaller, more efficient models (SLMs) tailored to specific tasks like payment remediation or data correction, prioritising explainability and control.

Regulatory frameworks, particularly the EU AI Act, will shape this adoption, emphasising the need for transparent, robust, and fair AI.

The infrastructure supporting this must allow for flexible deployment, training on synthetic data in the cloud while running inference on sensitive financial data on-premises, a core strength of hybrid cloud architectures.

Stablecoins, CBDCs, and sovereignty

2026 is poised to be a decisive year for digital currencies. The regulatory landscape, exemplified by the EU’s MiCA and the US stablecoin legislation, is providing the “rules of the game,” leading to increased institutional engagement.

The critical question will be which models gain mainstream traction, bank-issued money tokens, asset-backed stablecoins, or Central Bank Digital Currencies (CBDCs).

This debate will be underpinned by digital sovereignty. Whether for a CBDC or a critical national payment system, control over the underlying infrastructure is paramount.

Nations and central banks cannot have dependencies on technology stacks or operational control residing in foreign jurisdictions when managing monetary sovereignty.

The regulatory impetus shaping payments

Decisions like the UK’s move towards regulatory parity with US stablecoin rules highlight a key theme for 2026: harmonisation efforts to ensure market stability as digital assets blur geographic lines.

Crucially, regulations are defining more than compliance checklists, they are influencing the economic models of new currency forms.

The requirement to back stablecoins with high-quality liquid assets, for instance, directly links technological adoption to monetary policy and national balance sheets.

Adapt fast or be displaced – embrace open

For someone who has been in payments for many years, the outlook for 2026 is very exciting. We are witnessing a moment of simultaneous evolution across messaging, networks, assets, and intelligence.

I am especially keen to see how the connected instant payment landscape matures and what reactions it sparks in the Americas.

The digital currency space, above all, promises compelling developments as the theoretical debates of recent years yield to concrete pilots and policy decisions.

The payments market has transformed from a world of “if it works, don’t fix it” to one of “adapt or be displaced.”

This constant change, driven by technology, is reshaping how the world moves value. Navigating this requires a balanced focus on relentless innovation and uncompromising resilience. That is the challenge and the opportunity that makes 2026 such a compelling chapter to anticipate, and calls for platform technology that is not only performant and reliable but also inherently interoperable and sovereign.

This is where open source shines, offering transparency, flexibility and freedom to choose provider and geographic location.

Vendor-backed enterprise open source builds on community innovation with added security focus, lifecycle management, compliance, and technical support that business-critical workloads demand.

Institutions must therefore choose technology partners that offer the agility to adapt to this evolving regulatory tapestry without compromising on stability.

Designed as a government-backed digital version of fiat money, CBDCs combine the trust of centralised monetary systems with the flexibility of digital payments.

Unlike cryptocurrencies, which fluctuate based on market sentiment and are often decentralised, CBDCs are state-issued, pegged to national currencies, and intended to offer price stability and legal certainty—features that make them particularly relevant in a time of growing demand for secure digital payment systems.

According to recent data, over 130 countries representing 98% of global GDP are now exploring CBDCs in some form, including pilots, development, or research (albeit few have fully adopted them).

This rise reflects both technological momentum and regulatory intent to reclaim control over digital currency ecosystems, especially as private stablecoins and decentralised crypto assets have proliferated.

What sets CBDCs apart from cryptocurrencies

Stability and trust

While cryptocurrencies like Bitcoin or Ethereum operate in highly volatile and speculative environments, CBDCs are anchored to fiat currencies and issued by central banks.

This offers higher value stability and institutional backing, reducing the risk profile for users.

Design and oversight

CBDCs are programmable but centrally managed. Governments can impose compliance measures and offer consumer protection in ways decentralised crypto systems cannot.

Moreover, unlike crypto assets, CBDCs are not mined or privately issued, ensuring state control over monetary supply and transaction oversight.

Kar Yong Ang, financial market analyst at Octa, notes: ‘CBDCs offer a new model of digital liquidity—blending state trust and legal tender with tech efficiency. For traders, this opens doors to a more secure and transparent digital finance ecosystem.’

Why are central banks racing to develop CBDCs?

Here are three key reasons why central banks invest resources in CBDSs:

• The decline of cash and rise of digital payments. As societies increasingly favour digital over physical money, central banks face pressure to modernise public currency formats. In Sweden, for example, cash transactions make up less than 10% of payments. CBDCs are seen as a public alternative to private payment apps and platforms, ensuring monetary sovereignty in the digital realm.
• Controlling private stablecoin risks. Private stablecoins like USDT and USDC have raised concerns over systemic risk and shadow banking practices. A CBDC can serve as a stable counterbalance to these instruments, offering liquidity and legal clarity in fast-evolving financial markets.
• Financial inclusion and transparency. CBDCs can increase financial inclusion by offering digital wallets to unbanked populations, especially in developing economies. They also offer governments more visibility into money flows, enhancing tax collection and curbing illicit finance—though this has sparked debate around surveillance and privacy.

Pros and cons of CBDCs

CBDCs offer notable advantages: their value is typically pegged to fiat currencies, ensuring greater price stability than most cryptocurrencies.

With full state backing, they function as legal tender and may include programmable features like conditional payments. For underbanked populations, they also present a path toward improved financial access.

However, concerns remain. Privacy is a major issue, as CBDCs could give governments visibility into personal transactions.

They also pose cybersecurity risks, potentially becoming targets for large-scale attacks. Moreover, they could interfere with traditional monetary policy and financial market dynamics if not carefully designed.

For instance, commercial banks could experience deposit runs if individuals perceive CBDCs as a safer alternative to traditional money for savings.

Real-world cases

Although the majority of countries still research CBDC and their application in the economy, some have already implemented them.

• Bahamas. The Sand Dollar became the first nationwide CBDC in 2020. It now serves all islands through a network of mobile-based wallets.
• Nigeria. The eNaira, launched in 2021, has seen a slow adoption of less than 0.5% as of 2025. The government continues to offer incentives to boost usage.
• China. The e-CNY has been piloted in over 25 cities and integrated into public transit and e-commerce platforms. Its scale makes it the most advanced major-economy CBDC.

Looking ahead: the road to adoption

While CBDCs promise greater efficiency and offer more tools for governments to implement social objectives, they also pose new governance challenges.

To thrive, states will have to balance innovation with civil liberties, infrastructure resilience, and global interoperability.

As the world of digital currencies continues to develop, CBDCs are increasingly important for progressive traders to grasp. Keeping up with developments can give a vital advantage in understanding the future of money.

Trading involves risks and may not be suitable for all investors. Use your expertise wisely and evaluate all associated risks before making an investment decision.

Octa is an international broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and various services used by clients from 180 countries who have opened more than 52 million trading accounts. To help its clients reach their investment goals, Octa offers free educational webinars, articles, and analytical tools.  

The company is involved in a comprehensive network of charitable and humanitarian initiatives, including the improvement of educational infrastructure and short-notice relief projects supporting local communities.

Since its foundation, Octa has won more than 100 awards, including the ‘Most Reliable Broker Global 2024’ award from Global Forex Awards and the ‘Best Mobile Trading Platform 2024’ award from Global Brand Magazine.

A groundbreaking whitepaper, Regulated Blockchain: Infrastructure for regulated DeFi: Foundation for a golden age in finance, authored by fintech visionary Obi Emetarom, presents a transformative framework that addresses these issues and paves the way for a Regulated Internet of Value—a blockchain-powered financial ecosystem that seamlessly integrates innovation with compliance.

Traditional finance (TradFi) remains encumbered by high costs, cumbersome processes, and regulatory complexity. According to the World Bank, global remittance fees averaged 6.2% in 2023, significantly above the 3% target set by the United Nations Sustainable Development Goals (SDGs), making transactions expensive for millions worldwide. Meanwhile, crypto-based decentralized finance (DeFi) has struggled with trust, adoption, and oversight. In 2023 alone, crypto-related hacks and fraud accounted for over $1.8 billion in losses, according to Chainalysis, underscoring the need for a more secure and regulated approach.

The whitepaper argues that Regulated Blockchain Infrastructure is the missing link, providing a secure, efficient, and transparent foundation that combines the best of both worlds.

Regulated Blockchain is a new way of using blockchain technology to democratize financial services innovation while enforcing clear rules set by financial regulators and enabling real-time oversight.

It combines the security and speed of blockchain with the oversight needed to guarantee compliance, prevent fraud and ensure trust. Unlike cryptocurrencies that operate outside government control, Regulated Blockchain allows banks, fintech companies, and payment providers to use blockchain for faster, cheaper, and safer transactions— all with necessary compliance and regulatory oversight. This means people and businesses can spend, save and invest money more effectively, banks can deliver their offerings more efficiently, and regulators can prevent illegal activities, all while making financial services more accessible to everyone.

By embedding regulatory protocols directly into blockchain technology, financial institutions, fintech companies, and regulators can unlock frictionless financial services, automated compliance, and unprecedented levels of transparency.

“This whitepaper is a call to action for policymakers, financial institutions, and innovators,” said Obi Emetarom, the paper’s author and the CEO and co-founder of Zone. “The world cannot afford to operate on outdated financial models. Regulated Blockchain Infrastructure offers a clear path toward a future where financial services are secure, inclusive, and universally impactful. This is not just about improving efficiency—it’s about reshaping global finance to work for everyone, everywhere.”

The whitepaper outlines how Regulated Blockchain Infrastructure can accelerate economic growth, maximize financial inclusion, and improve regulatory efficiency.

For central banks and regulators, it provides a framework for seamless oversight and risk mitigation while supporting innovation.

For fintech firms, it presents a structured pathway for adopting blockchain technology without regulatory friction.

For investors and global financial institutions, it creates a transparent and secure environment that enhances capital allocation and investment opportunities.

At the same time, the rise of Central Bank Digital Currencies (CBDCs), now being piloted in over 130 countries according to the Atlantic Council, signals growing institutional adoption of blockchain-based financial solutions.

The Regulated Blockchain builds on this momentum by integrating programmable compliance, self-custody of assets, and automated financial products to redefine how value is exchanged, stored, and managed globally.

Obi’s ultimate vision is for multiple Regulated Blockchains to interconnect and jointly function as a Regulated Internet of Value that will power the fully digital and automated economy of the future.

With the accelerating pace of technological change, the time to rethink the foundation of the global economy is now.

As policy makers, regulators, financial institution leaders, and technology innovators work together to shape the future of financial services, this Regulated Blockchain whitepaper provides a roadmap to a more efficient, inclusive and impactful financial ecosystem.

These digital currencies challenge traditional state-controlled monetary systems by offering alternative transaction methods that can bypass governmental oversight and control.

The proposed shift toward decentralization and reduced state monetary power has significant implications, prompting reactions from governments and financial authorities worldwide.

Central Bank Digital Currencies (CBDCs) are pivotal in this ongoing monetary counter-revolution.
Positioned at the intersection of innovation and regulation, CBDCs are proposed by states as a means to reassert control over monetary systems.

This response is not merely about introducing new technology but is a strategic endeavour to reclaim authority that the widespread adoption of private digital currencies could dilute.

By incorporating retail and wholesale digital instruments that mimic the properties of cash and are accessible to the general public, CBDCs aim to balance the technological advancements seen in the private sector with the regulatory and fiscal responsibilities of the state.

Bitcoin’s Role in Redefining Monetary Sovereignty

To appreciate the transformative potential of CBDCs, it is crucial to understand the broader context of digital currencies, starting with Bitcoin.

As the first and most well-known cryptocurrency, Bitcoin introduces several pivotal economic and political dynamics that mirror the challenges and opportunities posed by CBDCs.

Bitcoin has reshaped perceptions of monetary sovereignty by providing an alternative to traditional currency systems.

Its decentralized nature enables users to evade government controls, presenting both opportunities and challenges. On one hand, Bitcoin can be seen as beneficial in regions where the rule of law is inconsistently applied, or monetary policy is detrimental to economic stability.

On the other hand, Bitcoin’s ability to facilitate illegal activities, such as evading sanctions or funding criminal enterprises, undermines the rule of law.

Additionally, Bitcoin’s volatility and the substantial energy consumption required for mining raise questions about its long-term viability as a stable monetary system.

The Emergence of Stablecoins and Regulatory Challenges

Beyond Bitcoin, the advent of stablecoins highlights further complexities in the digital currency landscape. An example is what happened to the now defunct Libra, later named Diem, a digital currency issued by Meta (formely Facebook) that was aimed at creating a privately issued currency backed by a basket of hard currencies issued by major central banks.

This proposal brought forth significant skepticism from national treasuries and central banks, which viewed it as an infringement on their monetary prerogatives.

The Diem Association has since announced the sale of its intellectual property and other assets related to the running of the Diem Payment Network to Silvergate Capital Corporation.

The “Treasury view” posits that for the state to protect the life and property of its citizens, it must maintain control over its monetary prerogatives.

This includes the capacity to manage capital flows and provide liquidity as a lender of last resort.
Stablecoins, by offering a new form of digital currency, threaten to undermine these prerogatives by enabling global, open, instant, and low-cost movement of money, potentially disrupting traditional financial systems.

CBDCs: A Strategic Reassertion

CBDCs represent a strategic response to the challenges posed by private digital currencies.

By developing CBDCs, central banks aim to provide a digital payment instrument that is a direct liability of the state, thereby preserving monetary sovereignty.

CBDCs can be designed as either account-based or token-based systems, with each model offering different advantages and challenges.

Account-based CBDCs would function as universal central bank accounts, extending access to online bank accounts directly with the central bank. This model could enhance financial inclusion and streamline payment systems.

Token-based CBDCs, on the other hand, would mimic the properties of physical cash and could be used for anonymous transactions, similar to traditional cash.

Balancing Innovation and Fiscal Stability

The adoption of CBDCs also reflects broader fiscal considerations. Governments often rely on seigniorage – the profit made from issuing currency – and capital controls to manage economic stability.

Bitcoin and other cryptocurrencies challenge these mechanisms by enabling capital flight and circumventing traditional monetary policies.

As such, governments are likely to prioritize the development of CBDCs to maintain fiscal stability and control over their monetary systems.

Moreover, CBDCs could potentially enhance the efficiency of monetary policy implementation, particularly in times of economic crisis. For instance, during the COVID-19 pandemic, proposals for “Digital Dollars” and “FedAccounts” gained traction as tools to distribute stimulus payments more effectively and promote financial inclusion.

The Future of Banking and Monetary Policy

The implementation of CBDCs could have profound implications for the future of banking and monetary policy.

By disintermediating commercial banks, CBDCs could shift the role of credit allocation and liquidity provision to the state.

This transition could reduce the fragility associated with fractional reserve banking and enhance the efficiency of payment systems.

However, the move towards CBDCs also raises concerns about privacy, cybersecurity, and the potential for increased government surveillance. Balancing these risks with the benefits of digital currencies will be crucial in shaping the future monetary landscape.

In conclusion, the political economy of digital currencies is undergoing a significant transformation. Bitcoin and stablecoins have challenged traditional monetary systems, prompting governments to respond with the development of CBDCs.

This strategic reassertion of state control over monetary systems aims to balance innovation with fiscal stability, shaping the future of banking and monetary policy in the digital age.

As the landscape continues to evolve, the interplay between private digital currencies and state-backed

CBDCs will be central to the ongoing debate over the future of money.

*The writer: Heath Muchena is the founder of Proudly Associated and author of Tokenized Trillions, Blockchain Applied and more.

She said: 

“It will be a journey and we will walk the journey together with the legislator. All European Institutions will be involved to make sure that Europe is equipped with the currency of the future. Cash is here to stay. You will have all options: cash and digital cash. 

So what does it mean for you? For Consumers, it would be free and easy to use everywhere in the Euro area. All of that, of course, is subject to the legislative process.

Cash or digital, the choice will be yours.”

This development has ignited discussions about the potential impact of CBDCs on the tech industry. 

Proponents believe CBDCs could enhance innovation and financial inclusion, while skeptics warn they could limit competition and lead to privacy concerns.

Understanding CBDCs

Central bank digital currencies (CBDCs) are digital versions of traditional fiat currencies issued and controlled by central banks. Unlike physical cash, CBDCs exist solely in electronic form. 

Several countries, including Nigeria, England, Sweden, and Uruguay, have explored launching digital versions of their currencies.

Nigeria and the eNaira

Nigeria became the first African country to launch a CBDC, the eNaira, in October 2021. The Central Bank of Nigeria (CBN) aimed to improve financial inclusion, combat money laundering, and promote digital payments with the eNaira.

However, these moves have led to increasing concerns. Nigerians have mixed reactions to the eNaira, the country’s CBDC. Supporters of the eNaira believe it can bring financial services to the unbanked population, many of whom rely on mobile phones. Fintech companies can create eNaira-based wallets and apps to make financial services more accessible.

They also argue that the eNaira can offer faster, cheaper cross-border transactions and reduce the risks associated with handling cash.

Nonetheless, critics say despite government incentives, adoption has been slow. Some Nigerians prefer the familiarity and privacy of cash. The long-term impact on traditional banks is not very clear, potentially discouraging tech investment in the financial sector and lastly, as with any digital currency, data privacy surrounding eNaira transactions is a worry.

Nigerians have protested government efforts to limit cash availability, viewing it as a push towards a cashless society. They see the eNaira as part of this effort and prefer the freedom and anonymity of cash.

What are People Saying about EU’s Digital Euro?

The announcement of the European Union’s new Central Bank Digital Currency (CBDC), the digital euro, led to a range of responses, showing concerns and skepticism about the implications of CBDCs for individual freedoms and privacy.

One common concern expressed by critics is the potential for CBDCs to centralize power in the hands of unelected technocrats, enabling them to exert control over how, when, and where the digital currency can be spent. 

This control could extend to the implementation of social credit systems, carbon allowances, and vaccine passport systems, raising fears of increased surveillance and erosion of personal autonomy.

There is also skepticism regarding assurances that physical cash will remain a viable option alongside CBDCs. Critics argue that proponents of CBDCs may have intentions to gradually phase out cash altogether, leading to further concerns about loss of financial freedom and privacy.

Critics also highlight historical context, such as the European Union’s drive towards ever closer union and control by bureaucrats, as evidence of a broader agenda aimed at centralizing power and control. 

This perspective challenges the notion that the EU is solely focused on good intentions, suggesting instead that it may serve interests that prioritize centralized control over individual autonomy.

Concerns about recourse in situations where banks refuse transactions or restrict spending highlight anxieties about potential abuses of power in a cashless society. Without the option to withdraw physical cash, individuals may feel vulnerable to arbitrary restrictions on their financial freedom.

In light of these concerns, some voices call for resistance against CBDCs and the perceived digital open-air prison they represent. They speak of the urgency in safeguarding individual freedoms and privacy in the face of technological advancements that have the potential to affect societal structures and power dynamics.

Let’s take a quick look at the potential benefits of CBDCs:

• Enhanced Efficiency: CBDCs could simplify cross-border payments, reducing transaction costs and settlement times for tech companies reliant on international transactions.
• Innovation Catalyst: A CBDC industry could spur the development of new financial products and services. Tech firms could leverage CBDCs to create innovative payment solutions, lending platforms, and loyalty programs.
• Financial Inclusion: CBDCs could provide access to financial services for the unbanked population, promoting financial inclusion. Tech companies could play a role in developing user-friendly CBDC wallets and applications.

However, CBDCs also present potential challenges for the tech industry:

• Disintermediation: CBDCs could disintermediate traditional financial institutions, potentially reducing the need for some financial technology (Fintech) companies.
• Competition: Central banks could choose to limit private sector involvement in the CBDC industry, hindering innovation and competition.
• Data Privacy: The data collected through CBDC transactions could raise privacy concerns. Tech companies involved in developing CBDC solutions would need to ensure strong data security measures are in place.

The Future of CBDCs and the Tech Industry

Ultimately, the debate surrounding CBDCs brings about deeper questions about the balance between convenience and control, individual freedom and centralized authority. 

Policymakers and citizens alike need to engage critically and thoughtfully to ensure that any digital currency initiatives serve the interests of the people while upholding principles of transparency, accountability, and individual autonomy.

The impact of CBDCs will depend on the design and implementation of CBDC systems by central banks. Nevertheless, CBDCs can impact the financial industry, presenting both opportunities and challenges to the tech sector.

Modern economies revolve around the delicate dance of inflation, interest rates, and market dynamics. Central banks, such as the U.S. Federal Reserve, wield significant influence in this dance. However, as the world shifts towards digital economies, new paradigms like decentralized finance (DeFi) and cryptocurrencies are emerging.

Central banks traditionally manage money supply through:

• Open market operations.
• Reserve requirements.
• Discount windows.
• Foreign exchange interventions where they might buy or sell their own currency to influence its value.
• Forward guidance through providing hints about future policy, consequently shaping market expectations.
• Negative interest rates which is an unconventional method where banks charge on deposits to encourage lending.

Consumer Price Index (CPI) is a measure of inflation. It gauges the average change over time in prices paid by consumers for goods and services.

Rising CPI indicates inflation, which erodes purchasing power. The US Federal Reserve uses interest rates as a primary tool to control inflation. Raising interest rates makes borrowing expensive, curbing spending and investments. Lowering rates does the opposite.

Equity markets often react to interest rate decisions. Higher rates might decrease corporate borrowing, leading to reduced capital expenditures and potentially lower stock prices. Conversely, lower rates can stimulate equity markets.

Crypto markets, still in their relative infancy, show mixed reactions because some investors and traders view Bitcoin as a hedge against inflation, whereas others see the entire crypto space as speculative.

Due to the impact central banks have on policy decisions, they have occasionally been accused of manipulating markets, either by intervening excessively or by not being transparent.

Central Banking vs Decentralised Finance

With the rise of crypto, central banks are now exploring issuing digital currencies. While CBDCs promise enhanced transaction efficiency, critics argue they might infringe on privacy and financial freedom.

This brings about the question of trust in Centralized vs. Decentralized systems. Historically, trust is placed in centralized entities. Decentralized systems challenge this, relying on consensus mechanisms.

Central banks, with their historical tools, have shaped global economies for decades. However, decentralized systems offer new paradigms of transparency, control, and financial inclusion.

As these systems evolve, it becomes crucial for societies to understand, adapt, and ensure that the future of finance aligns with collective values.

The Case for Decentralized Finance (DeFi) and Cryptocurrencies

• Economic Sovereignty: DeFi platforms operate without intermediaries, granting individuals control over their assets.
• Transparency and Security: Blockchain technology, underpinning most DeFi solutions, offers transparency and robustness against fraud.
• Financial Inclusion: DeFi can extend financial services to the unbanked, revolutionizing global financial access.
• Bitcoin as “Digital Gold”: With its capped supply, Bitcoin offers an alternative against inflationary traditional currencies.

Key Takeaways

The intersection of central banking and decentralized finance stands as a pivotal juncture in the evolution of global finance.

The longstanding influence of central banks, backed by time-tested tools and mechanisms, has fostered stability, yet also attracted criticism over market manipulation and lack of transparency.

On the other hand, the burgeoning realm of decentralized finance brings to the fore principles of individual economic sovereignty, unprecedented transparency, and broader financial inclusivity.

While DeFi and cryptocurrencies represent a seismic shift, marrying innovation with traditional financial systems’ stability becomes paramount.

It’s evident that as we march into the future, a hybrid approach – leveraging the strengths of both centralized and decentralized systems – may be the key to fostering a resilient, inclusive, and forward-looking global financial landscape.

Heath Muchena is the Founder of Proudly Associated & Author of Blockchain Applied, Tokenized Trillions and DeFi Millionaire.

To try and forestall such developments, central banks in all the world’s major economies and most of its lesser ones are exploring the creation of digital currencies, and a handful of emerging economies have already launched their own.

The widespread introduction of central bank digital currencies (CBDCs), especially in the world’s major economies, is not imminent.

But the groundwork being conducted in this area is detailed and in-depth, such that many central banks will be ready to launch when their governments deem the circumstances to be right.

Before that time comes, central banks have choices to make about the design of their CBDC systems, particularly those earmarked for retail use.

We spoke with two experts to understand what some of those options are and how the choices made may have an impact on financial inclusion and the role of private sector banks in this new payments landscape.

The state of play

As of June 2023, 11 countries or their currency unions had fully launched digital currencies, 21 had embarked on pilots, 32 had them under development and another 46 were at earlier stages of researching them.

Some initiatives are exclusively for retail CBDCs (including the 11 already launched), some for exclusively wholesale ones, and several large economies (such as China, the US, and the Eurozone) are exploring the launch of both.

With the exception of Nigeria, all of the 11 that have launched CBDCs thus far are small economies in the Caribbean region.

Why their speed to launch?

According to Marion Laboure, Senior Strategist at Deutsche Bank Research and co-author of a recent white paper on digital currencies, a major motivation for them is to expand financial inclusion, as most have large numbers of un- and underbanked citizens.

For Nigeria, says Ashlin Perumall, a partner in Baker McKenzie’s Johannesburg office, an additional impetus is to shore up the use of its own currency in domestic payments, thereby reducing use of the dollar, as well as to increase the visibility and traceability of money flows.

“There and in other African countries, CBDCs could solve problems that aren’t currently being solved,” Perumall  says.

There is currently less urgency in larger, wealthier economies to move toward CBDC launch. Singapore is a case in point.

After completing a pilot in late 2022, its central bank, the Monetary Authority of Singapore (MAS), stated that: “The use cases for a retail CBDC are unclear, given that electronic payments … are pervasive, and households and firms … are already able to transact digitally in a fast, secure and seamless manner today.”

Speaking of wealthy economies more broadly, Perumall also cites the travails of cryptocurrency markets as a reason for central banks to hold off. “Crypto threats to sovereign liquidity have receded somewhat in the past year,” he says.

The experts we interviewed nonetheless expect several major economies to launch CBDCs this decade. “It’s a question not of if but of when,” says Laboure.

A boon to inclusion

Bringing the unbanked into the financial mainstream is one of the principal advantages that a CBDC offers—particularly, as noted earlier, to less developed countries with large percentages of unbanked in their population.

A key feature of many retail CBDC projects is the ability of individuals to access a digital currency account offline as well as online.

“This is important as it effectively decouples financial inclusion from access to the internet,” says Laboure. Thus, people will be able to make CBDC transactions over basic mobile devices, using stored value cards, for example, or even text messages.

The financial inclusion benefit is not a given warns Perumall. “To lay claim to this feature, the system for a CBDC needs to be designed with inclusion in mind,” says Perumall. 

Offline access is one such design element, but there are more. For example,  the system must be interoperable with the diverse payment mechanisms used in an economy, and it must be accepted by merchants. It also requires simplified KYC (know-your-customer) and AML (anti-money laundering) processes.

Where the private sector fits in

Implicit in the above—and an altogether new departure in the history of banking—is the existence of a direct relationship between individual citizens and their country’s central bank, in which the former hold a CBDC account with the latter.

In some countries’ designs, citizens may use a mobile app to access that account directly, but it is more likely that private sector banks will play the role of intermediary in a two-tiered digital banking system.

There are nevertheless concerns that central banks could compete with retail banks for CBDC transactions, especially if the former opted to offer interest-bearing accounts. While not excluding that possibility, Perumall downplays disintermediation concerns.

“Private sector banks not only provide the mechanism for distribution of money into an economy,” Perumall says, “but they also provide the services and the management of such services that go along with it—things that no central bank has the capacity to do.”

Concerns also exist that CBDC accounts could exacerbate a banking crisis if customers began shifting funds from their retail banks to the safer haven of the central bank.

In Perumall’s view, however, the two-tiered system of most CBDC designs, along with non-interest-bearing accounts and limits on CBDC holdings, provide a safeguard of sorts against the possibility of bank runs.

Laboure similarly sees no CBDC threats to financial stability due to the same factors: their two-tiered design, zero interest accounts and caps on holdings. “Moreover, looking at countries where CBDCs are live, current adoption rates are low,” Laboure adds.

Preparing for the day

As the example of Singapore suggests, the possibility of an extended wait for the widescale introduction of retail CBDCs is real.

There is, after all, ample scepticism among politicians, and even some central bankers, about the very need for CBDCs.

“A solution in search of a problem?” is a recurring question about CBDCs asked in recent months and years by authoritative sources who posit the view that a digital currency offers more risk than reward.

Private sector banks should not, however, assume that launches will be delayed indefinitely. Singapore’s MAS, for one, has made clear that it could bring forward the launch of its digital currency if “innovative uses emerge or there are signs that digital currencies not denominated in [Singapore dollars] are gaining traction as a medium of exchange locally”.

Retail banks will need to make preparations. That means, for example, readying their technology systems to be able to process CBDC transactions at scale; creating electronic wallets or other end-user interfaces so their customers can begin making CBDC transactions; and developing ideas for new services associated with the management of CBDCs. It is not too early for banks to begin taking such steps.

Key Takeaways: 

• The widespread introduction of central bank digital currencies (CBDCs) in the world’s major economies.
• As of June 2023, 11 countries or their currency unions had fully launched digital currencies, 21 had embarked on pilots, 32 had them under development and another 46 were at earlier stages of researching them (data available in the article).
• With the exception of Nigeria, all of the 11 that have launched CBDCs thus far are small economies in the Caribbean region.
• Of the pilots, three are in Africa – Ghana, South Africa and Tunisia
• Principal advantages of CBDCs offers, retail CBDC key features and concerns.

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Bitcoin is set to peak at $42K this year, according to the average prediction from a panel of 29 industry specialists surveyed for Finder’s BTC price predictions report.

This is roughly the same prediction for the 2023 peak given in April this year, however the average prediction for the end of 2023 has risen from $35,000 to $38,000 – an increase of 9%.

Futurist Joe Raczynski thinks BTC will end 2023 slightly higher than the panel average at $40,000 thanks to growing institutional interest. 

“We are finally through the darkness of crypto winter. With a myriad of top financial institutions submitting an application for a Bitcoin spot ETF, the pressure is on the SEC to approve, and if so, tens of billions of dollars will chase Bitcoin this year.”

At its current value 43% of panelists, including Morpher CEO Martin Froehler, think BTC is underpriced. Meanwhile 36% say it’s priced fairly and 21% overpriced. 

Froehler predicts an end-of-year price of $40,000 given where we are in the interest rate cycle as well as the anticipated bitcoin halving event.

“We are almost done with the interest rate hike cycle, so the current macroeconomic headwinds will soon begin to fade. Simultaneously, we are about 9 months away from the next Bitcoin halving event, which historically has always propelled the price up dramatically,” Froehler said. 

Looking further ahead, the panel thinks BTC will be worth around $100K on average by the end of 2025 and over $280K by the end of 2030. 

Nansen CEO Alex Svanevik predicts BTC will be worth $115K and $260K by year-end 2025 and 2030 respectively, attributing his predictions to “high inflation and mistrust in institutions.”

Digital Capital Management managing director Ben Ritchie is on the more bullish end of the spectrum and thinks BTC will be worth $150K by 2025 and $375K by 2030. 

“Bitcoin’s utility extends beyond its function as a currency, encompassing data storage essential for the issuance of smart contract tokens and non-fungible tokens. Additionally, its robust security features contribute to its allure, instilling confidence among investors regarding the safekeeping of their Bitcoin holdings,” he said. 

However not all panelists share the same level of optimism. Digital strategist at Galia Digital Kate Baucherel thinks BTC will end 2023 at its current price of $30,000 before reaching $55,000 in 2025.  

“All markets are depressed, and crypto is no exception. BTC is sitting around a reasonable level. The impending halving in 2024 will likely start to impact the price towards the end of this year,” Baucherel said. 

Associate professor of decentralized finance at Nottingham Trent University Jeremy Cheah gave a more modest prediction of $45,000 by year-end 2025, pointing to “lawsuits and tighter market regulations on exchange platforms.”

Funds Management Operations at DigitalX Alex Nagorskii thinks best case scenario BTC could reach $35,000 by the end of the year and $65,000 by year-end 2025.

“Bitcoin is on the verge of entering the halving narrative, backed by potential flows from US spot ETFs, if approved. There are a number of ways this can play out which will largely depend on SEC spot ETF approval, a number of high profile exchange lawsuits and if any more bad actors are identified in the space.”

University of Canberra senior lecturer John Hawkins thinks BTC will be worth just $20,000 by the end of 2023. He anticipates a continuous decline until BTC is priced at just $100 by the end of 2030. 

“Bitcoin is a speculative bubble. It is very hard to predict when it will burst, but it will. Digital currencies will probably have a future, but it will be CBDCs not fiat crypto like Bitcoin.”

Overall, the majority of panelists (59%) say it’s time to buy, while 33% say hold and just 7% sell. 

While traditional banks still have a lot of ground to cover on how to solve the problem of financial inclusion, Africa is increasingly relying on digital and mobile services.

At the latest Monetary Policy Committee (MPC) retreat held in Lagos, Godwin Emefiele, the governor of the Central Bank of Nigeria emphasized the need to rethink financial sys­tem regulation, supervision and monetary policy imple­mentation in the country.  

He added that while post-COVID growth recovery in Nigeria can be adjudged to be moderate and stable, “we have seen a ma­jor change in the key sectoral drivers of that stable growth phenomenon, including the services sector, modernized agriculture, and manufactur­ing, suggesting that technolo­gy and innovation are playing a major role in output growth and economic development in Nigeria”.

This is important because it reiterates the regulator’s position on the importance of the regulation of the fintech sector, especially emerging frontiers like digital assets and cryptocurrencies.

In 2017, the CBN had earlier warned that cryptocurrencies were not legal tender and that investors were unprotected. In a circular dated February 5, 2021 (the “CBN letter”), the CBN had directed all regulated operators to desist from transacting in and with entities dealing in cryptocurrency.

In October of the same year, The Central Bank then went on to launch a digital currency with officials of the apex bank saying it would allow for financial inclusion and fiscal benefits to boost the economy.

The eNaira was therefore launched as part of the CBN’s cashless policy to improve cross-border trade, expand access to financial services, increase remittances from a large diaspora base and ultimately boost the country’s economy.

With emerging new asset classes such as Non-Fungible Tokens (NFTs) and Decentralized Finance (DeFi) built on Blockchain technology, it is clear that digital currencies are the next evolution of the financial technology ecosystem.

How can this impact the evolution of fintech in Nigeria? What are the benefits of building a structured and regulated ecosystem that’s open for innovation and collaboration between traditional institutions and new operators?

Regulatory Frameworks Will Ensure Certainty and Consistency In Policy Development

The Nigerian payment system has evolved significantly over the last decade, leapfrogging many of its counterparts in emerging, frontier and developing economies propelled by some key reforms by the different regulatory bodies.

The regulatory developments for the Nigerian fintech market have contributed to the ecosystem’s growth as they have demonstrated a commitment to creating an enabling environment that will support innovation in financial services, without compromising stability within the overall financial system.

Nigeria is also spearheading the adoption of CBDCs in Africa with the launch of the eNaira while the Securities and Exchange Commission also issued new digital asset regulations in May 2022.

In April, The Nigerian Communications Commission held a workshop in collaboration with the Bureau of Public Service Reforms (BPSR) and stakeholders, where it was concluded that Blockchain could be a bedrock of economic innovation and growth through effective implementation of policies and regulations.

Although we can still expect some policy harmonization as to how regulated entities will engage, it is clear that Nigeria is taking advantage of digital economy frameworks and regulatory initiatives that enables emerging technologies in the country. This is important because a regulatory environment clear about its goals will ensure that policymakers are always in alignment.

Driving Inclusion By Encouraging Innovation

The advent of blockchain technology has enabled digital records to be stored in a form that is even more permanent than physical records.

Blockchain technology stores numerous copies of the same records across multiple computer systems in a manner that is completely tamper-proof. This makes records on the blockchain less likely to be destroyed than physical ones.

This has created a situation where digital records are increasingly being more trusted and reliable than physical equivalents.

As the evolution of the financial system continues, the topic of decentralization will go hand in hand with it. It is inevitable because the conversation about how to ensure built-in transparency & accountability in the relationship between companies and citizens isn’t stopping anytime soon. Blockchain technologies are the future and will play a role in strengthening both the public and private sectors.

The application of blockchain technology in the Nigerian financial services industry is gradually gaining traction as industry players are now utilizing it in their service delivery. 

Notably, in 2021, Appzone, a Nigerian fintech software company, announced the launch of Zone, Africa’s first blockchain platform for payment processing that facilitates local and intra-African payments in fiat and digital currencies (we understand that a number of commercial banks in Nigeria are currently utilizing the company’s Zone product in processing the transactions of their customers).

HouseAfrica is another example of the revolutionary way through which blockchain technology is being applied to solve important challenges.

The company aims to develop intelligent and affordable homes while giving its investors maximum security of funds through the blockchain. In 2020, the company signed a partnership agreement with Nigeria Mortgage Refinance Company (NMRC) to deploy a digital/land property title authentication and verification system.

The system will make it possible for individuals and organizations – including financial institutions – to authenticate, validate or confirm the value of any property or land across Nigeria and ultimately improve the amount of mortgage financing transactions in Nigeria.

While blockchain technology is still generally unregulated in the Nigerian financial services industry, the adoption of blockchain technology via crypto-assets is now being regulated in certain respects. Pursuant to the 2020 SEC Statement on Crypto-Assets, crypto-assets are, by default, classified as securities unless proven otherwise. Consequently, the SEC also regulates crypto-token or crypto-coin investments when it is qualified as securities transactions. Well-defined regulatory policies like this will be key to further driving expansion and global adoption of digital assets while encouraging innovation in Africa.

Cross-Continental Economic Impact

Despite the rise of operators and stakeholders pushing for inclusive finance, the digital payment ecosystem across the continent – and indeed within most countries and regions – “is highly fragmented, without an overarching regulatory framework that can tie all the payment solutions together”.

Cross-border payments are often both costly and slow. This is due to a combination of conflicted regulatory coordination in many regions, and private sector actors in the instant payments landscape constantly pursuing short-term profits and market share over longer-term regional growth and inclusion agendas.

Coordination of regulation will mean greater interoperability of instant payments systems and would help promote peer-to-peer (P2P) interactions, small-scale trade, and cross-border e-commerce between African countries.

Conclusion

While no one can predict the future of fintech in Africa, what we do know is it requires a nontraditional regulatory approach—one as invested in the importance of experimentation and entrepreneurship as the practices it oversees.

Alongside the Olympians who have gathered from around the world to compete in physical displays of strength, China is flexing its own proverbial muscle in the global economy.

In a move that laps the United States and Europe, China has released the digital yuan to the public, making it the first economic superpower to issue a central bank digital currency (CBDC).

According to Reuters, China’s new digital currency, the e-CNY, is being used to make 2 million yuan ($315,761) or more of payments a day in its latest pilot at the Beijing Winter Olympics.

While the Bahamas already has a fully functioning digital currency, China’s sheer size means that its attempt to develop a central bank digital currency (CBDC) is being closely watched.

Its latest trial is notable for the number of people attending the Games, and the fact that athletes, coaches and media from around the world can all use it via smartphone apps, physical payment cards or wristbands.

“I have rough idea that (there are) several, or a couple of million RMB (yuan) of payments every day, but I don’t have exact numbers yet,” Mu Changchun, director-general of the PBOC’s Digital Currency Research Institute, said during a webinar arranged by the Atlantic Council.

Few months back, Global mobile-first payments infrastructure company Celo, in partnership with global media company Forbes hosted a virtual forum under the theme: “The Future of Central Bank Digital Currencies (CBDCs) and Cryptocurrency,” where experts from central banks and the world’s leading financial institutions discussed progress, challenges and what the future looks like around this evolving technology.

Speaking at the virtual event, Jim Cunha, executive vice president, Secure Payments & FinTech, Federal Reserve Bank of Boston said “As countries adopt the idea of CBDCs, we should build flexible and sustainable structures that work with different countries according to the problems they are trying to solve. We must also think of “Privacy” when we talk about CBDCs”.

Seeing the increasing need for digital currencies and security of its users, Celo also announced the launch of a new solution called Provo, a value-add sandbox for public and official sector experimentation that allows Central Banks to explore and experiment with central bank digital currencies and other digital assets.

In a statement titled ‘Winning the Digital Currency Race’, Briana Marbury, Executive Director, Interledger Foundation, said that creatively rolling out the digital yuan at the Games by providing athletes ski gloves and smartwatches with built-in digital payment functions, China is hoping to gain an advantage over their measured competitors who have been sluggish to move forward with their own CBDCs. Conveniently (for them), the digital yuan also happens to be one of only three forms of payment accepted in the Olympic Village.

“Strong-arming aside, this is an impressive display of a large government body showing its willingness to embrace innovation.

“However, the initial uptake of the digital yuan has been slow due to stringent Covid restrictions imposed on Olympic visitors and privacy concerns highlighted by government representatives from the West.

Marbury further said that as the major superpowers in the world contemplate the best way to introduce a CBDC into their economy while simultaneously maintaining stability, the Chinese government has bet that the fastest across the finish line wins the race.

She added that in the US specifically, with the exception of a few outliers, many government officials have been more focused on regulating the emerging payments space in a time when collaboration and understanding are needed.

“There is a fine line between reflection and research, and paralysis.

“If we don’t transition from analyzing to actually implementing – even if it’s a small pilot – the US is guaranteed to lose the race by forfeit”, Marbury warned.

Interledger Foundation aims to build access to financial pathways around the world. Marbury brings 15 years of non-profit experience and leadership to the role, as well as a passion for promoting financial inclusion for all.

As Executive Director, Briana’s goal is to educate and bring awareness around the Interledger Protocol.

She is dedicated to expanding the public’s understanding of the technology’s immense potential to improve lives. Briana was named one of the top 100 leaders in 2022 by Fintech Magazine.

The Interledger Foundation works to support financial innovation that will create a more equitable and creative society through an open payments network where anyone can easily earn, share, buy, sell and trade with anyone else in the world.