Bitcoin and other cryptocurrencies cannot replace cash
- BIS publishes the research on non-cash payments trends.
- Central banks issuing their own coins can disrupt the financial system.
The Financial Times discusses the research by the Bank for International Settlements (BIS) that revealed the exponential growth of non-cash payments. Their value nearly doubled since 2000, if measured as a share of GDP. The trend is alarming as it may turn coins and notes as we know them into a relic of history. Such countries as Sweden have already reduced cash in circulation, which leads the authorities to the discussion of issuing own digital currency.
Sanctioned Venezuela with the economy nearly ruined by the crisis, has made the first step in that direction. Just as the chief aim of Petro, new Venezuelan coin, is to overcome sanctions and attract foreign investments, other countries, finding themselves in similar predicament may follow the lead.
While the shift away from cash is unlikely not occur tomorrow or even within the nearest future, many experts raise questions about consequences of central banks issuing their own digital coins.
"Central banks must carefully weigh the implications for financial stability and monetary policy of issuing digital currencies" - BIS says in a joint report released by Committee on Payments and Market Infrastructures (CPMI) and the Markets Committee.
Providing consumers with direct access to digital money issued by central banks may have unpredictable consequences on the role of money and the financial system as a whole.
While Bitcoin and other digital currencies revealed the drawbacks of the financial system, they are not a true substitute for cash, conclude the researchers.
Author
Tanya Abrosimova
Independent Analyst
