The Brief / Global A N A LY S I S
Does your country really need digital cash? Bloomberg columnist Andy Mukherjee investigates…
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ine out of 10 central banks are exploring electronic versions of physical cash, according to the Bank for International Settlements’ 2021 survey of monetary authorities released last month. Nearly everyone, it seems, is convinced that the future of money is digital. While that might be right, does every country need to be on the bandwagon just yet? Not really. Whether you’re Poland or Peru should make a big difference in deciding just how big a priority a central bank digital currency, or CBDC, should be. More advanced economies face a specific challenge: waning demand for cash. The share of banknotes in point-ofsale transactions has dwindled to 11 per cent in North America, 19 per cent in the Asia-Pacific and 27 per cent in Europe. As currency bills eventually start vanishing from circulation and into vaults, the public’s trust in the convertibility of bank deposits into official money may become “more of a theoretical construct than a daily experience,” in the words of the European Central Bank’s Ulrich Bindseil and others. That could be problematic for financial stability, especially if lightly regulated private-sector tokens like stablecoins – cryptocurrencies that promise 1:1 convertibility with dollars or other widely accepted assets – step into the breach and replace official cash. For emerging markets,
ILLUSTRATION: GETTY IMAGES/ARTPARTNER-IMAGES
MORE ADVANCED ECONOMIES FACE A SPECIFIC CHALLENGE: WANING DEMAND FOR CASH. THE SHARE OF BANKNOTES IN POINT-OF-SALE TRANSACTIONS HAS DWINDLED TO... Europe
27%
Asia-Pacific
North America
8
June 2022
19%
11%
gulfbusiness.com
