Is the era of money over? Central banks contemplate launching...

Many central banks around the world have begun studying the possibility of launching digital currencies in a move that may represent a turning point in the world of payments that have been dominated by money for more than three thousand years.

Recently, the European Central launched a test process to issue a “digital euro”, the results of which will appear by the middle of next year, while the Swedish central bank continues to test the digital krona and will make a decision on it by next February.

A few days ago, a group of seven central banks led by the US Federal Reserve (the central bank) issued a general framework explaining the characteristics that should be characterized by digital currencies.

Other dimensions of the digital yuan

The Chinese central bank was a pioneer in this field, as it started testing the digital yuan in several Chinese cities early this year, and in recent days it began issuing 10 million digital yuan randomly to test the digital payment system in yuan, and according to some experts, the success of the digital yuan experiment It may support Beijing’s efforts to reduce its dependence on the US dollar.

The drivers of the cryptocurrency trend

The trend of central banks towards digital currencies can be explained in two directions: The first is in line with the era of technology and consumers’ need for a digital payment system that integrates with their digital lives.

This began to be evident in the growth of electronic payments, in China, for example, 81 percent of smartphone users resort to telephone payment systems.

And in Sweden; It is the country with the least use of cash (cash) in the world. The volume of cash does not exceed one percent of the GDP. As for Britain, the volume of payments via payment cards exceeded the use of cash for the first time, during the past year.

Coronavirus speeds up the steps

It is true that the process of digitizing payments was in rapid growth, but the emergence of the Corona virus accelerated this process, with people heading to reduce the use of cash for fear of catching the virus and the significant growth in the volume of e-commerce, which in April only jumped by more than 209 percent.

PayPal added more than 7.4 million users during the same month, and more than 13 million people in Latin America during the first quarter used their credit cards for online shopping for the first time.

How do digital currencies differ from cryptocurrencies?

The other reason for adopting digital currencies is that central banks may seek through this step to pull the rug from under the feet of cryptocurrencies that differ from digital currencies in being decentralized currencies that support anonymous transfers without the need for a middleman or central bank, which eliminates a large part of the role Central banks and financial agencies.

Also, Facebook’s plan to launch its cryptocurrency “Libra” prompted central banks to think about digital currencies, after what happened was a message to them that: If they do not think of creating a digital currency, another party will do so. With more than 2.7 billion Facebook users, it was worth thinking about.

Digital Currency … Benefits and Concerns

Like any other technological invention, digital currencies provide a range of benefits to users and responsible authorities alike. In addition to facilitating payment processes, these currencies enable small companies to enhance and spread their business and allow governments to monitor fraud and tax evasion. But at the same time, it raises a set of concerns, most notably the risks of electronic piracy and the possibility of exploiting people’s data.

Does cash become a thing of the past?

Deutsche Bank excludes the end of the money era entirely, because these currencies will remain a means of preserving value in times of uncertainty during the coming years and decades, according to the bank’s viewpoint. While more than half excluded the end of the money from use completely.