Digital Currency: Will It Replace Paper Money?
Since President Biden signed Executive Order 14067 on March 9, 2022, there has been much debate about digital currency. This debate has revolved around the creation and issuance of a U.S. Central Bank Digital Currency (CBDC) and whether or not it is designed to replace paper money.
Digital forms of currency, called Central Bank Digital Currency (CBDC), are being developed by many countries around the world to supplement the current supply of paper money.
However, depending upon who you ask, this is not the future direction of money. Many still insist that cash is king, but this ideology seems to break down along generational lines. As we dig deeper into this question, let’s see if we can figure out if, as a society, we are moving to a cashless system.
Are We Moving To Digital Currency?
With the signing of Executive Order 14067 and the rise of Bitcoin and other cryptocurrencies, it would seem that we are indeed heading toward a cashless future.
Central Banks and the International Monetary Fund (IMF) have embraced digital currency. Currently over 10 countries across the world have deployed a CBDC.
As forms of payment continue to evolve, it is easy to see how our economy is slowly starting to transition from using paper money. This can be illustrated by looking at digital payment usage along generational groups.
|Generation||Birth Years||Number of Digital Money Transaction (Online Payments Digital Cash Apps)|
|Silent Generation||1925-1945||1 out of 10|
|Baby Boomer Generation||1946-1964||4 out of 10|
|Generation X (Gen X)||1965-1985||7 out of 10|
|Millennials (Gen Y)||1981-1996||9 out of 10|
|Gen Z (Centennials)||1997-2012||9 out of 10 (of adult age)|
Younger generations, especially those who where raised with technology, are much more likely to embrace the use of digital forms of payment. This can also be seen when looking at the use of digital cash apps.
Central Banks Moving To Digital Currency
However, it isn’t just the spending habits of people that seems to be changing. Many governments have already deployed a CBDC and over 100 Central Banks, are working toward creating their own forms of digital currency. These CBDCs will be issued, monitored and controlled by the respective central bank.
China is arguably the largest country to have created and successfully deployed a CBDC. Their CBDC, the digital Yuan, was introduced to the public during the 2022 Winter Olympics in Beijing and continues to be rolled out throughout various facets of their economy.
In the United States, The Fed has partnered with MIT (Massachusetts Institute of Technology) to develop a CBDC for the country. This development continues after an initial testing phase in February of 2022.
Interest In Cryptocurrency Continues To Increase
The ever increasing interest in cryptocurrency seems to continue to point towards a cashless economy.
While currently Bitcoin and other cryptocurrencies are considered property on the U.S., their use as a form a payment for goods and services continues to increase. Currently over 34 million Americans own cryptocurrency and this number is only expected to increase.
This phenomenon of acceptance is not just relegated to the U.S. This has been proven by the acceptance of Bitcoin as legal tender in El Salvador in 2021 as well as its increased acceptance across the U.S.
What Digital Currency Can Replace The Dollar?
While determining what digital currency can replace the dollar would seem to be a likely topic for debate, that may not necessarily be so. Currently, the government is the entity who determines what is considered legal tender in the U.S. And as of the writing of this article, only the U.S. dollar is consider money here.
Now, obviously this will inevitably need to be changed to accept the deployment of a CBDC. At that point the question will be, do they phase out paper money by devaluing it or making it illegal to use?
Do you think that is an impossibility?
This kind of thing has already been done on multiple occasions in counties across the globe.
The most notable was in India, the 7th largest economy in the world. The Indian government gave its citizens only hours notice before their money became worthless.
So the next logical question is, can cryptocurrency replace the dollar?
Again the answer lies in the U.S. making Bitcoin or some other cryptocurrency legal tender. If you are looking to consider this possibility, check out our article where we discuss cryptocurrency being real money.
The Future of Digital Currency and Paper Money
When trying to look into the future it is often difficult to see much past the present. With the discussion of digital vs cash payments, our discussion is limited, to some degree, by our current level of technology.
Many economists and regulators agree that cash is still relevant, however they feel it no longer king. The fact that cash is still the 2nd largest form of payment however, makes that argument difficult at best.
The realization that our society is changing and becoming more technology based is hard to deny. Just about all banking professionals and economists agree that this change was already on the horizon, but was accelerated due to Covid.
It seems inevitable that these technological changes will affect our economy and the way we transact in it.
What is a CBDC?
Understanding a Central Bank Digital Currency (CBDC) is going to be an important part of the U.S. economy in the future. Discover Exactly What A CBDC Is Here.
Is Cryptocurrency Better Than Banks?
Understanding the difference in using cryptocurrency to conduct transaction rather than your bank can be important. Discover If Being Your Own Bank Is Best Here.
What is the best option to replace the dollar?
Thanks to the move by governments to develop and deploy a CBDC, the discussion rages about if this is the best option for replacing the dollar. Read More About The Best Option To Replace The Dollar Here.