Cryptocurrencies are fundamentally changing the nature of economic transactions in the world. They are also challenging the traditional power balance in a society where the dissemination of money is controlled by central authorities. Governments at all levels all over the world are unsure how to respond to this challenge, and responses vary from enthusiastic adoption to outright bans and crackdowns.Ultimately, the effectiveness of a cryptocurrency will depend on successfully applying it to solve actual social needs and its adoption by the broader society. It is possible to create an economic system where crypto and fiat currencies not only coexist but do so symbiotically, solving problems that cannot be solved by fiat currencies alone. For a crypto-fiat (CF) currency to augment or replace fiat currency, it has to have a great user experience and has to be easily understood by the general population for adoption. It also needs to fit well into the general paradigm of most societies where a majority of social and economic monetary activities are based on the commercial bank system.Most major commercial banks worldwide have a large IT infrastructure, which, if integrated appropriately with blockchain technology to provide value-added services for different types of scenarios, will reduce the costs of broad adoption of a CF currency. Such integrations will obviously also provide better services to the general population.Designing a CF walletA strong and widely adopted CF currency will require some change management to alleviate the obvious shock to current banking systems. A CF currency will primarily impact the M0, M1, and M2 supplies in the economy. We think any potential shocks can be minimized or eliminated by incorporating properties of cryptocurrency wallets into the existing banking system, so crypto and fiat versions of a “steady value” are managed under the same customer account.This will enable traditional account-based and wallet-based models to co-exist and operate at different layers. The CF wallet can be designed to require two private keys (held by the bank and the customer respectively) to create a transaction. The wallet is not used in daily accounting or recon processes but only for specific value-added user functions. This will minimize the impact on the existing banking system.The ownership verification of CF currency will rely on the issuing bank’s blockchain infrastructure. The wallet functions at the bank’s end will be limited to providing security and integration into the underlying banking infrastructure. On the customer side, there will be significantly more investment required to make the crypto-related properties more usable in different applications such as account access and money transfer.CF currencies can be the liability of the central or an authorized issuer institution, and does not need to be managed by a commercial bank providing the customer account. This will keep the status quo of commercial banks because customers and their accounts will be managed by them. Money transfers within and across borders, however, does not need to rely on traditional bank accounts and the ownership of CF currency can be verified directly by the issuing bank. A CF currency can be seamlessly exchanged from one form to another, and therefore peer-to-peer transactions can be done via the crypto wallet component, managed directly by the customer.BenefitsKYC & AML enhancement: The combination of traditional bank account and cryptocurrency will significantly enhance KYC and anti-money laundering capabilities of the banking system.Funds distribution: A typical scenario in many countries is the distribution of funds from a central authority to institutions and individuals through multiple intermediaries. Misappropriation and poor execution result in huge reconciliation errors between top level information and actual results. With the smart tracking of a CF currency, a central authority would be able to oversee the status easily.General usability: By reusing existing commercial accounts, the user experience would remain the same so customers can enjoy the benefits of cryptocurrency without having to adapt their behaviour.Instant and stable asset conversion: Because of the nature of CF currencies, conversion between fiat to crypto, or between crypto assets, whether within an account or while transferring assets to another account, will be instantaneous.SummaryThe digital transformation brought about by a CF currency system will primarily manifest itself in the speed and quality of banking services. A CF currency will allow seamless integration of the existing banking system and infrastructure into the blockchain framework. A CF currency enables cryptocurrencies to operate separately as well as add value to the commercial banking system. We thus create an economic system where there are one or more central issuers of a CF currency who are responsible for the M0 supply, commercial banks who conduct business as usual on the M0, and third party vendors who can integrate cryptocurrency properties into the banking experience to integrate specific value-added services into the system.