When do you stop using coins and bills?

By | May 18, 2023

Cash: The IMF is promoting the use of electronic transactions only, but several countries are resisting. What will happen to cryptocurrencies? When will cash be definitively abolished? All the news in xristika.gr.

The Money Tech Revolution: International Monetary Fund report finds digital money driving profound changes around the world as UK government pledges to protect… cash and US prepares to tax cryptocurrency transactions

The verdict on whether cryptocurrencies are a bubble or not is still out and their rises and falls in prices fuel the controversy, but it is already a fact that more and more official organizations are focusing on the issue of digital money and the new reality that is emerging. lives. training internationally.

Even the International Monetary Fund has weighed in on the issue, including cryptocurrencies, along with digital currencies being prepared by central banks and stablecoins in the new forms of money that are changing the world map.

In a report titled “The Rise of Public and Private Digital Money”, issued in early July, the IMF highlights that technological developments are bringing about a new era of digital money, which requires the intervention of institutions around the world, to that the new forms of money can remain reliable, not threaten financial stability within countries, but also not lead to a loss of monetary sovereignty of states.

The conclusion expressed in the report is that the IMF must intervene in this field, recording developments, giving opinions and proposing policies, since, as characteristically stated: “the rise of digital money has deep, far-reaching and interconnected consequences for the internal economic and financial stability, but also the stability of the international financial system”.

The report notes that cryptocurrencies are too volatile to qualify as “money” technically, but they are also accepted as a means of payment and are therefore part of the new landscape, along with digital currencies prepared by central banks, money electronic used by bank payment systems and various other forms of digital values ​​(tokens) traded on various platforms. As characteristically mentioned in the report, the developments are so radical that in a few years the current list of forms of digital money will be obsolete.

The expansion of digital money is such that in Britain, one of the cutting edge issues is the preservation of cash, as the latter is gradually…disappearing.

Various lobby groups, parliamentarians and newspapers such as The Telegraph are taking part in the ‘Protect the Cash’ campaign.

Yesterday, Treasury Secretary John Glenn promised that the government would address the problem before the summer to ensure access to cash, particularly for the most vulnerable.

This particular campaign is focused on keeping ATMs, which banks are constantly reducing, because demand for cash is falling.

In Britain, the number of ATMs fell by 18% in 2018-2019, a trend that apparently accelerated amid the pandemic. This development mainly affects the weakest social strata, which also have the greatest barriers to access technology and sophisticated financial services offered digitally.

Cryptocurrencies remain a “red flag” for official institutions and most economists, as they are, and indeed are, simple units of account with no intrinsic value, no collateral that can be bought or sold through independent private platforms. , but no one promises to redeem them. So, many economists say, the real value of cryptocurrencies is zero, even if they are bought and sold at high prices, due to speculation.

On the other hand, however, its spread has created private transaction networks, whose users are constantly increasing.

According to data from the crypto.com platform, in January 2021 there were 100 million cryptocurrency users, which by June had become 221 million.

Of course, the most likely motivation of these users is speculative, as prices go up and down with huge jumps and corresponding drops, but the whole thing has brought to the fore a new trading technology, which is becoming more and more popular and of which, until now, banks, governments and regulators are left “out”. Little by little, of course, things change.

In Germany, according to Bloomberg, legislation is being pushed through that would allow investment firms to invest up to 20% in cryptocurrencies, although most analysts estimate that traditionally conservative German investment firms will be very hesitant.

In the US, according to Bloomberg, the Senate, with a compromise of Democrats and Republicans, is advancing arrangements to tax cryptocurrency transactions to raise approximately $28 billion in revenue that will finance a portion of public investment in infrastructure. of transport and energy.

Under these proposals, cryptocurrency trading platforms will be required to report all transactions to the IRS, while all businesses will be required to do the same for purchases and sales of more than $10,000 in cryptocurrency.

However, cryptocurrency advocates view these developments positively, reasoning that if the authorities are preparing restrictions, controls, and taxes on cryptocurrencies, this means that cryptocurrencies…have a future.

As financial analyst and investment adviser Michalis Nikoletos points out in a post on Twitter, while US government officials claim that Bitcoin is being used for illegal activities, they will fund public investments with the proceeds from it.

Cash: The first “experiments”

Capital.gr, closely following the issue and having participated in the public consultation, presents some of the concerns that arose in the simulations, in relation to the purposes of the digital euro.

1. The limit of 3,000 euros. Because the digital euro will be a new currency that is intended to function like cash, the issue of currency circulation was raised so that inflation and other monetary figures are not affected.

Thus, it was decided, at least in the first phase, to fix an amount, p. up to 3,000 euros, which every citizen will have the right to have in their digital wallet.

This amount arose after research that showed that 3,000 euros is enough cash in the “pocket” of an average European for his cash transactions. Then they proceeded to a theoretical exercise.

A citizen had 2,700 euros in his digital wallet. Another owed the first 500 euros.

The following problem arose from this exercise: The second who owed the 500 euros could not pay it back to the first with digital euros, because the first would exceed the limit of 3,000 euros.

I could return 300 digital euros. And the remaining 200 digital euros? Perhaps, in cash in euros or with another transaction.

Here, then, a problem with the limit of currency circulation per person was identified, as well as the difficulty of making the digital euro work as easily as euro cash.

In addition, given that, according to a design scenario, the digital euro may have a different interest rate, the citizen in the example who receives 300 digital euros and 200 physical euros may win or lose compared to the 500 digital euros he receives. had initially borrowed. The rate is considered the same between digital and physical euros.

2. Purchasing power. The ECB, by design, does not want to conduct monetary policy through the digital euro, nor for the latter to influence monetary figures.

Nor should it be an investment instrument or a reserve element. This may be possible if you look at the eurozone as a whole.

However, the limit of 3,000 digital euros does not have the same purchasing power in all member countries of the Eurozone.

They have a different value in Luxembourg, another in Greece and another in Bulgaria. This of course also applies to the physical euro.

With the difference that it is a reserve element, a monetary and investment instrument. Therefore, with the currency restrictions and the ceiling of 3,000 digital euros, “investment arbitrations” can be created in cross-border payments. E.g. the price is 3 euros or 2.5 digital euros. This defeats the basic principle that the digital euro should work alongside cash and have exactly the same value, utility and convenience.

3. Inflation. The continuation of the previous issue highlights the structural differences that exist between the Eurozone economies.

For example, 3,000 digital euros might not create inflationary pressures in Germany, but might in Bulgaria or Greece, due to higher purchasing power.

Please note that the digital euro will be a new currency, to be issued alongside the physical euro. Consequently, liquidity, that is, money circulation, increases.

4. International currency. The previous example goes beyond the borders of the Eurozone. Like the physical euro, the digital euro will also move in parallel outside the EU.

The limit of 3,000 digital euros in the Eurozone, in the USA or in Canada, could make sense and not create problems in the exchange with the sizes of the euro. But the limit of 3,000 digital euros in Uganda, India or Turkey may have problems in terms of currency exports, inflationary effects in non-EU countries. and, finally, to the monetary aggregates and monetary decisions of the ECB.

5. Anonymity. The digital euro must work like cash, that is, payable on demand. The ECB can, for example, issue codes and citizens can exchange them through digital wallets like cash.

If this is done using an online system that will be linked to euro bank accounts, then anonymity may be lost.

Therefore, it is considered the case of an offline transaction or the use of some part of the cryptocurrency technology. But cryptocurrency mining consumes a lot of energy. Therefore, a technical problem of code exchange and redemption will have to be solved.

6. Stable coins. Since the digital euro will have the value of the physical euro and possibly use some crypto currency technology (eg DLT), why doesn’t the ECB issue its own stablecoin (rather than a digital euro) pegged to the euro? In this way, it can offer a regulated digital currency issued by a central bank and supervised and available to all credit institutions in the Eurozone.

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