Low interest rates, he said, were the main enticement for people to come and join a new bank — but they would be obsolete in competition against an official digital currency, which could easily process a digital payment the same way.
In addition, Buonomo said digital currencies, especially central bank digital currencies (CBDC) may eventually be able to replace all bank accounts.
He made those remarks at an online panel discussing the future of the world beyond the coronavirus pandemic, saying that new digital forms of currency may be able to sidestep the long-held throne of traditional cash and card payments.
Buonomo said digital currency could have its benefits, including better security than the oft-hack-prone traditional banks and a lack of the cumbersome fines and fees the traditional banks often put on customers’ shoulders.
Buonomo didn't have a definite answer on which cryptocurrency would become the default mode of currency in this scenario, although he said the tech limitations and need for privacy would count out most of the public blockchains. He said the regulators would need to have total control over a cryptocurrency-fueled system that replaced traditional banking.
One way Buonomo could see it being done is if a new cryptocurrency were created and issued by a central bank.
That idea has been explored by PYMNTS recently as the pandemic was in the early stages, when one proposal for U.S. stimulus distribution involved a new “digital dollar.” That could have meant a balance expressed as a dollar value comprised of digital entries, recorded as liabilities in Federal Reserve bank accounts, or an electronic unit redeemable by a legitimate financial institution, the document said.
Visa has also explored the idea, with a patent application for its own digital currency, underpinned by blockchain.
And in China, the government is working on a pilot to test a new digital yuan with several businesses including Starbucks, McDonalds and Subway, which could launch sometime later this year.