There’s work to be done in the global financial system — and digital currency may be able to advance it.

With only brick-and-mortar infrastructure, “there will continue to be billions of people who are on the margins on financial systems” asserted Dante Disparte, chief strategy officer for Circle, which operates USD Coin (USDC), at Wednesday’s Money 20/20 conference in Las Vegas. USDC is a stablecoin tied to the U.S. dollar.

“If anybody has an instinct that this is merely a developing or emerging world issue, remind ourselves what we could not do with money in the United States with the advent of COVID-19,” Disparte said. “So digital forms of money, real-time payments, instant payments, and the types of solutions that are enabled by competition around how money moves — including digital currencies, like stablecoins — I think are really important. There’s a lot of unfinished work to do in the global financial system.”

Disparte participated in a discussion Wednesday with Sheila Warren, deputy head of the Centre for the Fourth Industrial Revolution at the World Economic Forum.

“It’s worth noting that there’s not a lot of incentive on the part of legacy actors to solve these problems,” Warren said. Of course, it’s important to acknowledge that there is no technology intervention on its own that is going to solve such complex societal problems. This is also an infrastructure issue. It’s an access issue. It’s in some cases, an education issue.

“But really, it’s a matter I think of the will and determination of builders in the space to address this specific topic.”

Warren and Disparte discussed three types of digital currencies:

CBDC

Central bank digital currencies (CBDC) are fiat money issued by central banks, which in theory have the same level of control as paper or metal money. “The central bank digital currency conversation is no longer academic around the world,” Disparte said. “Something like 90% of the world’s central banks are in some degree of exploration and experimentation.”

When Washington held two hearings on CBDC, and whether the Federal Reserve System should digitize the U.S. dollar, the Bank Policy Institute and the American Bankers Association wrote long letters opposing it, Disparte said.

“How do you ensure public oversight, public control over monetary policy — but you continue to innovate how money moves?” he asked.

Warren noted that both regional and local governments are already experimenting with different kinds of digital currencies.

“Should the central banks around the world and certainly in free Western societies … issue a form of currency at the retail level, that raises a whole host of complex questions around privacy, the risk of de-platforming people from their money, the concept of redlining money — and that money has an on-and-off switch. That’s terrifying on many, many dimensions,” Disparte said. “I think the better posture is to keep the air gap between the central bank and the banking system and payment systems, innovators.”

Stablecoins

Stablecoins, like the USDC, are pegged to a cryptocurrency, a fiat money, or to exchange-traded commodities. But not all stablecoins are equal, Disparte and Warren cautioned.

“Innovators have to also learn from what I characterize as the ‘era of internet funny money’ … stablecoins masquerading as stable assets. But, in fact, there’s not much behind them, and they might very well be vaporware,” Disparte said. Vaporware refers to a product that is widely advertised that is never actually produced.

Cryptocurrencies

Cryptocurrencies, such as Bitcoin and Ethereum, have intrinsic value only, Warren said.

“They’re volatile, in part because their value is determined by the market,” she said. “Bitcoin specifically is hypersensitive to any signal or indicator — whether it’s from the SEC, a central bank — about what might happen in other parts of the space, namely stablecoins and CBDCs,” Warren added.