Digital cash and how it affects you

What are the economic consequences of digital cash? What are its implications from an economic perspective? In recent years, several proposals for electronic cash have appeared in cyberspace. In several cases, forms of digital cash are already in use. The economic consequences of these transactions have not yet been fully examined. For some observers, a major economic consequence of electronic cash is the free issuance of private currency by commercial banks or other non-business enterprises. However, if we look at the history of money, it is not easy to make privately issued currency credible in the eyes and wallets of the public.

As long as there is competition between banks, private banks will sometimes go bankrupt. Nothing weakens the credibility of privately issued currency more than bankruptcy. The most important characteristic of digital cash is its transnationality.

Digital cash does not recognize national borders. It is not controlled by any central bank of any national state. The unprecedented efficiency of international digital cash payments may, in fact, increase the instability of the global monetary system. Indeed, this efficiency can lead to conflicts between providers and users of digital cash and the central banks of nation-states. There are more than a dozen proposals for electronic payment systems on the Internet.

Compared to using cash in the real world, transmitting a credit card number over the Internet can lead to the following difficulties. First, there is the whole question of security. Credit card numbers can be seen by unauthorized people because the Internet is an open system. In the real world, there are several means to minimize fraud. A customer using such a card will generally choose to transact in trusted or familiar facilities, stores, and markets. Second, those cards can only be used in authorized stores. Small businesses or unauthorized individuals are generally unable to transact with these plastic items. In other words, credit cards cannot be used for peer-to-peer payments.

Cash encourages peer-to-peer payments. Third, these electronic payments usually charge a small fee. Although the cost is low, it can be significant when the payment itself is very small, such as less than $ 1. As a result, those electronic items cannot be used for micropayments. A cash payment is used for even the smallest financial transactions. Finally, the receipts for these card payments leave residual records of expenses. Those who issue electronic cash know exactly what kinds of goods and services have been purchased, as well as where and when they were purchased. In other words, user spending through the use of debit cards can be tracked while cash payments are untraceable. Electronic payment systems, more or less, try to deal with the above problems. Depending on the extent to which those systems solve these problems,

Only time will tell if the history of virtual trading will be peaceful, successful and closely coupled with the current operating characteristics of the international financial community.

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