Central bank issued digital currencies could become a reality soon if the words Christine Lagarde (IMF chief) are anything to go by. Speaking in Singapore, Christine Lagarde said that central banks need to look into issuing digital currencies in order to fill the void that has been left by the decline of cash. Her argument is that there is a need for state-backed currencies to avoid a situation where,
“Too much power could fall into the hands of a small number of outsized private payment providers.”
Ms. Lagarde’s statements have wide-ranging implications on the financial system, and more specifically, on cryptocurrencies that are aimed at the banking industry such as stellar (XLM) and XRP (XRP). That’s because, if central bank digital currencies become a reality, then they could radically alter the equation in the cross-border payments market since they would be fast, low cost, and have an element of anonymity. So what would be the possible implication of such currencies on stellar (XLM)?
Stellar has made significant progress in the cross-border payments market, through its partnership with IBM. Stellar’s position in this market could grow even in the age of central bank issued currencies. That’s because the blockchain world wire allows banks to settle in either stellar or central bank issued cryptocurrencies. It’s actually clearly spelled out on the IBM blockchain world wire website as below.
Two financial institutions transacting together agree to use a stable coin, central bank digital currency or other digital asset as the bridge asset between any two fiat currencies. The digital asset facilitates the trade and supplies important settlement instructions.
This is an indicator that even if central bank issued currencies become the norm, the stellar blockchain will still have a place in the cross-border payments market. Since the IBM blockchain world wire is based on the stellar blockchain, it then follows that even as banks settle using central bank issued currencies, they would be doing so on the stellar blockchain, which would be adding to the transaction volumes on this blockchain.
Besides, the stellar blockchain has uses that transcend the cross-border payments market. For instance, stellar-based security tokens are slowly becoming a reality. So far, STOs have been gaining momentum to the extent that exchanges are now looking to launch STO-focused exchanges. Bithumb is leading the way on this front and is looking to launch a security exchange in the U.S. If STOs become the norm and there is an STO explosion, the value of stellar (XLM) would also exponentially go up in value. It would be a similar scenario to what happened to Ethereum during the ICO boom of 2017 that pushed ETH to over $1500.
Clearly, stellar (XLM) is well covered in the market, irrespective of changing market dynamics such as the rise of central bank issued digital currencies. Stellar’s long-term prospects look good, and it could be highly undervalued at current prices. If these use cases gain widespread market adoption, Stellar (XLM) could easily hit its all-time highs, and probably make new highs in the market.