President Joe Biden signed an executive order that would replace cash with cryptocurrency, and allow the government to track and control people’s finances and spending. It differs from traditional electronic currency as it never leaves the digital realm, unlike dollars, euros, yen or pounds, which can be converted into physical cash. There are several kinds of digital currencies in circulation today, and the main difference between them lies in their level of centralization. Millions of people opened digital bank accounts and downloaded payment apps on their phones during the pandemic, and these behaviors show no signs of slowing down.
While banks and credit unions are open during regular business hours, crypto networks are open 24 hours a day, 365 days a year. For example, Kraken, a Canadian cryptocurrency wallet where users can buy and sell digital currencies like stocks in over 190 countries, boasts equally consistent customer support for a market that never sleeps. Money laundering and other proceeds of crime would also be impaired by a digital currency that makes paper money obsolete with a secure ledger of every transaction from start to finish. A stable and well-functioning monetary system relies on all forms of money – public and private – being exchangeable with each other one-for-one, or ‘at par’.
Those who currently have access to digital payments would have an alternative that improves choice and delivers resilience through increased diversity in payments options. The World Economic Forum sees a few benefits of digital currency as it pertains to transferring money across the globe. For one, digital currencies will do away with waiting times of 24 hours to several days since the digital cash can be sent to its destination in seconds. Since the middlemen — financial institutions and regulatory bodies — aren’t in the picture quite yet, no-fee money transfers are currently a reality for anyone with digital currency. However, whether or not that will stay the same once the central banks get a hold of the system remains to be seen. Also, alternative credit agreements could also arise from digital currencies since records of transactions could be used to access credit in place of financial bank records.
The future of cash is uncertain, but it is unlikely to disappear entirely. Instead, it is more likely that cash will coexist alongside digital payment methods, each serving different purposes and catering to different needs. The continued use of cash will depend on factors such as technological advancements, government policies, and consumer preferences. The Federal Reserve is committed to ensuring the continued safety and availability of cash and is considering a CBDC as a means to expand safe payment options, not to reduce or replace them. “When I hand you a $20 bill, there is no data captured by anybody from that transaction…it’s a relatively anonymous private thing, whereas all digital forms of payment generate data trails,” Maurer said.
A discussion of whether digital currency will replace money was launched by the highest echelons of financial authority at the Singapore FinTech Festival in 2023. Since 2009, the exponential growth and adoption of cryptocurrencies have caught the attention of governments around the world, leading them to pay close attention to the benefits they offer consumers, merchants, and businesses. From faster and more cost-effective payments to enhanced security and privacy, the benefits of using digital currency are swiftly leading scores of people to choose them over traditional FIAT money. Now these two countries—China and Sweden—have again moved to the forefront of a revolution that will decisively change the nature of money as we know it.
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In practice, this would mean that a CBDC intermediary would need to verify the identity of a person accessing CBDC, just as banks and other financial institutions currently verify the identities of their customers. There isn’t necessarily an economic reason that dictates a need to keep paper money. Unlike fiat currencies, most cryptocurrencies exist in a decentralized form, meaning that no centralized authority oversees or regulates them. Of course, CBDCs might not have this advantage because central banks can assert their influence on them.
This data-driven approach allowed the researchers to paint a vivid picture of public sentiment and the factors influencing consumer behaviour towards digital currencies. The truly revolutionary change in finance seemed to have been heralded by Bitcoin. It was introduced in 2009 by a person or collective who remains anonymous to this day and is managed by a computer algorithm rather than anyone in particular. This cryptocurrency quickly captured the imagination of the public, including jaded financiers, technologically sophisticated millennials, and those in search of the next big thing.
For example, she noted that much of the money we use today is already electronic, through demand deposits, while a big reason people don’t use banks is because they don’t trust them. If you’re already skeptical of the financial system and potentially the government, a CBDC might not change those views, Skinner said. Christina Skinner, an assistant professor of legal studies and business ethics at the Wharton School, said that moving toward CBDCs would shift the monetary power from the private sector, or banks, to the government. In a worst-case scenario, Maurer said governments could use digital trails to surveil a population and prevent them from using mobile or digital services if they disapprove of their financial activity.
