These scenarios all have profound impacts for the treasurer and, even if some seem unlikely, the paper gives a sense of what the future may look like. Digital payments have substantially increased in convenience compared with cash as digital-user interfaces expand into ever-more human activities. At the same time, cash continues to be perceived and widely used as a store of value. Cash may continue to be used as a means of payment by the non-digitally inclined and by digitally savvy people for self-regulation, for its tangibility, for teaching the value of money and out of security and privacy concerns.
Anyone can hold digital currency issued by the central bank — referred to as central bank digital currency. People can choose where to hold their digital currencies — in an account with the central bank or a commercial bank. They may continue to use commercial banks to hold their digital currency and assume the counterparty risk in exchange for a higher interest on their deposits.
New, centrally issued currencies are the new money; new currencies and issuers replace sovereign currencies and central banks. Non-sovereign currencies become the dominant form of money. These currencies are not pegged to a sovereign currency or basket, but are under the full control of their issuers. In the last 10 years, we have seen how relatively easy it is to defraud, cheat, and lose money in the current financial system. The banks print money out of thin air and profit from doing so.
Today, we are closer than ever to a financial revolution in which money will disappear and be replaced by something else. The use of credit cards has dramatically increased in recent years.
However, a new and more comprehensive system is rapidly developing: mobile payment solutions. New technologies are providing new ways to make payments and transfer money via mobile phones, apps, Bluetooth solutions, and so on.
We do not yet fully understand the consequences of a society without money. Even today security is merely a footnote in the recommendations of the European Central Bank. You may call it national security; however, you may also call it financial terror. What will happen when we will experience massive IT breakdowns that are expected to occur in the future?
Future wars will not be fought by troops on land but rather by people sitting behind computer screens. Earlier, banks have not shown the capability of taking timely precautions, and IT companies still lack the evidence to prove that they respect privacy and are capable of protecting sensitive data.
Thus, we are facing a completely new and challenging ethical and security-related problem with e-money and virtual payment methods. The young generations have quickly adopted to the new payment methods, and many of them do not know the feeling of holding a real banknote in their hands.
In other words, it is a huge market. This market is still based on money, but money spent by using mobile phones. Because people are not holding the money in their hands, loyalty is likely to decline.
Israel is known for being a trend-setting nation as far as innovation and IT is concerned. There, entrepreneurs are working on the development of the currency of the future because Israel is a good place to test such new initiatives.
The American company Robocoin has set up their Bitcoin ATM, which makes it possible for people to exchange their virtual currency to cash. She states that believing that money has a value is an illusion. Therefore, she, together with millions of others, is trying to do something about this. You encounter names such as Isracoin, Heart Money, and Ripplepay, which do not just boast ethical leadership but also regulations, making them passable as global currencies, credit and lending systems, as well as savings methods.
On the other hand, representatives of the Swedish Banking Federation and the Danish Central Bank see no reason for CBDC for all citizens According to them, that would be possible, but they argue that none of the existing problems would be resolved.
In particular, Steve Keen and Miguel Ordonez explicitly addressed the role of private commercial banks and the need to move away from private money creation, which is still under-appreciated in academic discourse. The privilege of banks to generate new money causes an irresponsible instability of the financial system and thus of the economies. The preliminary groundwork has been done.
Now it is up to politicians to swiftly make the necessary decisions to improve our monetary system. Piece originally posted and translated by Lino Zeddies here. But even this scenario is difficult to picture, in part because of how we have historically placed a value on paper money. The concept behind money dates back to the beginning of civilization.
It's no surprise why money caught on amongst civilized people: It was a much more efficient and convenient way to transact business as opposed to bartering with other goods and services.
Can you image keeping all of your wealth in something like livestock? But unlike goods and services, money does not hold an intrinsic value in and of itself. In fact, today, money is merely a piece of specialized paper or numbers on a ledger. While it's important to note that this was not always the case for much of history, money was minted in coins of metals that held real value , today the system relies on a mutual set of beliefs.
That is to say, that money has value because we as a society have assigned it value. In that sense, you can consider money a good with a limited supply and a demand simply because we want more of it. Simply put, we want money because we know that other people want money, so we can trade money for goods and services. This system works because a majority of us, if not all of us, believe in the future value of this money.
So if we are already in the future where the value of money is simply the value assigned to it, what has stopped us from moving toward an entirely digital currency? The answer is in large part due to our national governments. We have seen the rise and falls of digital or cryptographic currencies like Bitcoin. Some continue to wonder what we're all still doing with the dollar or the pound, euro, yen, etc.
But beyond the issues of storage of value with these digital currencies, it is difficult to imagine a world in which such currencies replace the national currencies like the dollar.
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