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Large organisations turning to digital currencies for stored value

Gartner predicts a major acceleration in the use of digital currencies over the next couple of years

About 20% of the world’s biggest organisations will use central bank digital currencies (CBDCs) and cryptocurrencies by the end of 2024, driven by the search for higher yields.

Less than 1% of large organisations currently use these currencies, but the next two years will see this rocket as organisations seek higher returns on stored value.

Avivah Litan, analyst in the Gartner IT practice, said: “There are some organisations planning to use digital currencies for payments but they will mainly being used for stored value and a hedge against inflation.”

This includes CBDCs, which are government-backed, and cryptocurrencies such as blockchain. “Half of hedge fund managers in companies that manage a total of $180bn are looking to invest in cryptocurrencies and expect 7% of their assets to be stored that way within five years,” she said.

Digital currency is the electronic form of currency coins and notes that can be stored in a digital wallet. A user can turn digital currency into cash by withdrawing cash from a bank or ATM.

The encrypted form of digital currency is called cryptocurrency. This uses blockchain technology and doesn’t depend on financial institutions to verify transactions.

“Increasing mainstream acceptance of cryptocurrencies on traditional payment platforms and the rise of CBDCs will push many large organisations to incorporate digital currencies into their applications in the coming years,” said Litan. “Digital currencies will be primarily used by these organisations for payment, a store of value and the ability to leverage high-yield investments available in decentralised finance applications.”

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She said that with Chinese digital currency on the horizon for business-to-business payments, organisations paying Chinese companies will need to be able to do so digitally.

Alexander Bant, chief of research in the Gartner Finance practice, said there has been a noticeable “uptick in interest in digital currency and blockchain applications among CFOs [chief financial officers]” since the start of the year. “While volatility of cryptocurrencies remains a concern, anticipation of clearer regulatory guidance, and the advent of CBDCs, now offers CFOs more avenues to pressure-test use cases for digital currencies,” he said. 

Gartner recommends organisations first clarify specific use cases for digital currencies before evaluating appropriate IT stacks to incorporate them in the enterprise.

“Each primary use case comes with a host of technological, regulatory, legal and strategic considerations for both CFOs and applications leaders to assess, including selecting appropriate service providers and the ability to monitor and react to ongoing regulatory guidance,” said a Gartner report. 

Gartner said there is already a “healthy environment of service providers and off-the-shelf solutions” available to large enterprises that have identified a specific use case for digital currencies.  

Most use cases to-date will not require organisations to develop their own customised applications, said Litan.

“Many large banks, payment platforms, institutional digital asset custodians and wallet providers have already done the heavy lifting in this area, which should provide large enterprises with a minimum of friction in deploying their own digital currency applications,” she said.

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