In 2021, the cryptocurrency market regained the public’s attention as the value of one Bitcoin broke through its previous all-time high of nearly $20,000 to reach a price of almost $70,000. However, in 2022, the market suffered numerous high-profile failures, including the crash in value of stablecoin provider Terra’s UST and the collapse of crypto exchange FTX. By 2024, the fallout from those events and others, and subsequent bear market (in which many cryptocurrencies fell 90% from their heights), meant that crypto had once again faded from the average person’s consciousness.
Although sentiment turned positive as Bitcoin rallied and again crossed $70,000 in March 2024, driven by the approval of Bitcoin ETFs (which allow investment in futures contracts rather than cryptocurrency itself), concern regarding the market still lingers for many. This concern has been heightened by pending governmental regulations designed to limit cryptocurrency growth, such as the Security and Exchange Commission’s litigation efforts classifying many cryptocurrencies as securities. The regulator has filed lawsuits against 31 crypto firms it accused of violating U.S. securities law. Although the SEC ended one of its investigations in June, given the crypto sector’s tumultuous history it is unsurprising that many in the travel industry have dismissed cryptocurrency as a passing fad, as they did after the comparable 2017 crypto and blockchain hype bubble popped.
However, flying under the typical travel industry radar is the fact that the central banks of many nations have begun issuing digital currencies of their own. These Central Bank Digital Currencies (CBDCs) have characteristics similar to cryptocurrencies, but with one critical difference: As opposed to the decentralized nature of many cryptocurrencies, with Bitcoin being the prime example, CBDCs are fully centralized and have been created, promoted and controlled by existing central banks. For more on centralization versus decentralization, see The Decentralized Computing Future (2021).
The purpose of a CBDC is to act as a digital version of a country’s currency. As few travel suppliers and retailers currently accept digital currency today, the introduction of state-sponsored digital currency adds a new wrinkle to the types of payments that would need to be accepted. Phocuswright’s forthcoming Global Travel Payments Report 2024 illustrates the lag in acceptance of digital currencies, with seven in 10 travel companies having no plans to accept them (see Figure 1).
This Research Insights article is a preview of the full analysis CBDCs are Coming: Is the Travel Industry (and the World) Ready?, which explores the latest trends in CBDCs, their overall impact, and what is needed on the travel supplier/retailer end to accept CBDCs. The dust has not settled on the CBDC issue, but clearly multiple governments are pushing ahead with their CBDC efforts, and preparations need to be made.
