Global | Digital currencies: progress with care

Summary

Digital money has been around for some time: the deposits we hold in banks, and in turn the reserves banks hold in central banks, consist of money that for decades has been registered and operated digitally. However, some concern has now arisen about the so-called "digital currencies".

Key points

• Key points:
• In fact, "currency" and "money" are not the same thing: currency (cash) has been an easy-to-access "type of money" that until now we have been able to store and trade with quickly, easily and anonymously without the need for an intermediary.
• Central banks are now seriously researching into future digital versions of their currencies. For example, in 2020 the Bahamas launched the "sand dollar", a digital version of its Bahamian dollar; and China has started real trials for a digital yuan.
• Among the objectives of these projects is to preserve the effectiveness of monetary policy; guarantee a universal means of payment to easily access what is increasingly electronic commerce; and prevent any "foreign or unregulated" means of payment from acquiring a dominant position, which could allow criminal activities or result in people's transaction records being accessed for unknown purposes.
• One of the questions that most central banks - including the Central European Bank (CEB) - have been asking for some time is whether the issue of digital currencies by the monetary authorities is the safest and most effective way of achieving these objectives.
• In fact, there is speculation that there may be a digital euro within five years: a prudent period, allowing the many options to be assessed. Meanwhile, the ECB continues to look closely at all kinds of experiments, both inside and outside the EU.

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