Don’t be surprised, however, if the actual result turns out to be less than a libertarian feast.
On the one hand, the European Union is going in the other direction. The new EU rules, which took effect on December 30, require that large stablecoins – tokens that facilitate trades of Bitcoin, Ether and other risky digital assets by converting 1:1 to dollars, in euros or other fiat currencies – must park 60% of their reserves in bank accounts. This level of entanglement with the banking system will ultimately “create incredibly significant systemic risk,” argued Tether Holdings Ltd. CEO Paolo Ardoino. But failure to comply will make Tether’s USDT, the leading stablecoin, difficult to access for European investors. Banks are ready to step into the void with competing products. Traditional finance could prevail over crypto companies.
Cryptocurrency tracker
And then there is Asia, with its own plans to harness the power of blockchains. China, in particular, wants to use it to resist both dollar hegemony and Silicon Valley’s utopian idea of decentralized finance. Overall, 2025 could prove to be a potentially tumultuous year for companies located at the intersection of the money, banking and technology sectors. Here are the five emerging trends to watch:
An iron curtain descends
The world of money is divided into Western and Eastern blocs. The Bank for International Settlements’ recent departure from mBridge, after Russian President Vladimir Putin identified the underlying remittance technology as a tool to circumvent sanctions, was a watershed moment. While Thailand, Hong Kong and the United Arab Emirates are all involved in the project – and Saudi Arabia joined in June – it is China that is leading the mBridge initiative.
A platform that allows financial institutions to exchange digital currencies issued by their central banks to settle cross-border claims of corporate clients could prevent the kind of U.S. surveillance that put the daughter of Huawei Technologies Co.’s founder under house arrest in Canada. Since then, unease about the weaponization of the dollar has only grown. An alternative mechanism that circumvents both the US currency and the SWIFT messaging system would reduce Washington’s policing powers. The estimated 36 to 40 percent of demand for the greenback that comes from its role as a “vehicle” for indirect exchange of two currencies other than the dollar could also decline.
Money flows freely and quickly
Within the Eastern Currency Bloc there will be greater integration. India and Southeast Asia are moving toward interconnecting their national payment systems; and other countries are free to join. Tourists from Hong Kong pay for golf lessons in Thailand by scanning QR codes and debiting their bank accounts at home. All these experiments give shape to Nexus. The open protocol enabling international smartphone payments in 60 seconds or less, which I described three years ago as the next big thing in consumer banking, is reaching critical mass.
Digital twins are waiting to be born
Innovation, however, will focus on what Citigroup Inc. calls the “ultimate use case” for blockchain technology: a $4 trillion market for the tokenization of financial and real-world assets by 2030. Here also, Asia wants to show leadership. . Hong Kong is exploring digital representations of everything from green bonds to electric vehicle charging stations, while Singapore seeks to replace manual processes with “smart contracts,” or self-executing computer code, to speed up fund management. private banking and many others. segments of its vast financial services sector.
Enthusiasm for digital money is waning
However, certain fashions will fade. Central bank digital currencies, or CBDCs, could be one of them. In a 2024 survey by the London-based Official Monetary and Financial Institutions Forum, only 13% of central banks said connecting CBDCs was the best solution for improving cross-border transfers. That’s down from 31% in 2023, according to OMFIF’s latest Future of Payments report. Beijing accelerated its e-CNY, a digital version of China’s official money, after Meta Platforms Inc., then called Facebook, announced plans for Libra, a global currency, in 2019. Following Beijing’s lead, other countries have begun to consider their own CBDCs. Well, Libra is long dead, e-CNY hasn’t really taken off, and Asset is not interested in a digital dollar. The ardor of other countries is also cooling.
Deposit tokens are coming
China could further promote e-CNY as a tool to weaken the dollar’s outsized hold in critical areas, such as global oil trade. Western central banks, however, will be content to limit their CBDCs to wholesale use: financial institutions can exchange these coins to settle their claims on each other. Consumer demand for cheap cross-border transfers will be met by linking national payment systems to the Nexus protocol. Or – if there is sufficient demand for money that moves according to pre-programmed rules – placing bank deposits on the blockchain.
These will be claims on the issuing financial institutions, so not really a sovereign liability like money withdrawn from ATMs. And yet, most people treat them as such. Unlike stablecoins, tokenized deposits will not need to maintain a 1:1 reserve. Deposit insurance will be enough to give users confidence in the value of the money in their e-wallet. The existing balance of power will be preserved: crypto companies will be freer than before to provide speculative assets. But what we call money could well continue to be controlled by traditional banking institutions in 2025.
