The economy is facing a dramatic change that will lead to the emergence of a cashless culture.
In the long term, commerce and finance will change profoundly, so a cashless economy will
come quickly. Cryptocurrencies and central bank digital currencies will be able to replace paper
Currently, central bank digital currencies (CBDC) are fully operational in ten countries around the world, including China.
However, most countries using CBDCs are developing countries with a low supply of banking services. For them, CBDCs are a breakthrough opportunity for the development of a national payment system. Moreover, CBDCs reduce an economy's dependence
on cash and free the public from the uncertainty associated with it. During the pandemic, for example, people increasingly used electronic payments to reduce their risk of infection. Cash is also a common target for attackers.
In recent years, the proportion of central banks exploring the potential of digital currencies for domestic and cross-border payments has increased significantly. According to the Bank for International Settlements (BIS)
, 86% of global regulators are now exploring digital central bank currencies. By the end of 2021, digital currencies had been officially launched in regions such as the Caribbean, Southeast Asia, and Africa.
Countries on the African continent, plagued by runaway inflation, have been the first to shift away from the traditional fiat money system. Residents are moving to digital credit and cashless payments, even where mobile technology and financial infrastructure are weak. In this regard, it will take much longer for developed countries and economies to transition to digital money.
Central bank digital currencies have little or no impact on the crypto market, while classic cryptocurrencies have their own features and applications.
Cryptocurrencies open up a new direction in the economy
, allowing financial services to be built and used on new models without being tied to central banks or other regulators. More and more people are buying and storing cryptocurrencies on cryptocurrency exchanges and forgoing complex, specialized wallets. The barrier to entry into the crypto market continues to drop. Crypto wallets are increasingly integrated into smartphones and will eventually be as convenient as regular mobile banking.
Cryptocurrencies are less convenient for everyday payments than central bank digital currencies because of their volatility and insufficient legal protection. Blockchain companies and projects are trying to overcome these disadvantages through strict corporate control, accountability, and specific architectures.
Digital money will slowly replace cash. On one hand, the elimination of paper money will affect large, developed cities and countries in the near future. On the other hand, the digitization of payments may happen much faster in developing countries. The development of projects with digital currencies is progressing very quickly, so joint projects in this direction could be a realistic scenario in the near future.