Leading economist Ishwar Prasad's observations on the future of money transitioning from currency notes to digital form
Sweden's Ricksbank, the world's first central bank, was involved in a new currency revolution in 1668 when it printed its currency notes. Ricksbank hopes to have the last currency note in circulation in the country by 2030. That is part of another monetary revolution. Sweden will be the first country to complete the transition from printed and minted coins to digital currency.
When the revolution is won, what will be the future of the currencies that people are using to exchange everything from gold coins to bitcoins? What will be the relevance of the central banks controlling the world economy as government currencies migrate to the digital wallets and cryptocurrencies of private banking institutions?
The book Future of Money- How the Digital Revolution is Transforming Currencies and Finance, by Professor Ishwar Prasad, Department of Economics, Cornell University, USA, analyzes the future of the medium of currency.
Material coins and currencies are becoming obsolete. The general impression is that private-free cryptocurrencies such as Bitcoin and Ethereum will take that place instead. But Ishwar Prasad says the evolution of the currency will not be complete without the world's central banks participating in the revolution and central banking digital currencies (CBDCs) coming into the mainstream.
He predicts that physical currencies and currencies will soon disappear from the monetary system and that digital currencies will become a mainstay of the economy.
The Reserve Bank of India's observation of the need for a centralized digital currency based on the rupee is a signpost to the future of the currency. In addition to Sweden, China and Japan have already begun experimenting with digital currencies, led by their central banks. The Bank of England and the European Central Bank are preparing their digital currencies. And the Reserve Bank of India
With the adoption of the concept of centralized digital currency, the digital currency revolution will gain momentum.
Competition with private digital currencies will increase as CBDCs enter the mainstream. Reliability and sustainability will make CBDC more acceptable.
Cryptocurrency technology will be further enhanced as the digital currencies of tech giants such as Facebook and Amazon come together to compete with CBDCs.
The popular revolution in digital currency will begin with the speed of exchange, increased transparency and lower transaction fees. This will help in a big leap in the export sector. Remittances from expatriates can be done faster and cheaper. More secure and transparent investment opportunities will be created at home and abroad.
With the advent of democracy in the financial markets, the popularity of financial services and products will increase beyond those outside the banking sector. You do not even need a savings account in the bank to keep and deposit your monthly salary. Basic banking facilities will be available to anyone as salaries in digital rupees are part of the existing digital payment system. The fact that the exchange charge will be very low will help small enterprises.
The benefit to the government with the digital rupee is that it can prevent illegal activities. Since secret transactions are impossible, black money transactions or drug trafficking are impossible with digital rupees. What each rupee is used for will be evaluated digitally and illegal activities will be reported. Thousands of unregistered transactions that are currently unregistered will also become official in the digital economy.
In his book, Ishwar Prasad underlines that the transition to digital payments and cryptocurrency is only the beginning of bigger changes. The gist of his ideas is that the digital economy, which combines CBDCs and private digital currencies, will henceforth be an influential force in the world.
