At present, the way of making payments has evolved exponentially. It is that if we go back a few years ago, the only form of payment was cash or by bank card. Currently there are many ways to pay for a product or service leaving aside the use of cash.

Digitization and new technologies are changing our societies at a dizzying pace and payment methods are no exception.

Therefore, we rule out cryptocurrencies created by private initiatives such as bitcoin or more recently the currency launched by Facebook. These currencies can be interesting in different contexts, such as countries with high inflation.

However, these private currencies do not meet the characteristics of what “good money” should be for several reasons:

• They suffer from a lot of volatility in their value for speculative reasons.
• Its opacity facilitates the financing of any illegal activity that we can imagine in a simple and instantaneous way.

Advantages of ending with cash

The implementation of a public digital currency and the consequent end of cash could generate significant benefits depending on its design. Among these advantages we find the following:

• The reduction of costs associated with the printing, transport or secure storage of banknotes and coins.
• Unlike cash, which is completely anonymous, a public digital currency leaves a trace: the monetary authority can trace it. This would make it extremely difficult to execute and finance illegal activities such as corruption, money laundering, tax evasion, and arms or drug trafficking.
• From a macroeconomic perspective, ending cash could serve as a solution to address the cash lower bound problem. The Central Bank could introduce negative interest rates up to the level necessary to stimulate aggregate demand and achieve its inflation and economic growth targets in a context of stagnation.

Disadvantages

Despite the potential benefits of ending cash, a decision of this magnitude is not without its challenges and drawbacks. Among them, we can point out:

• Failures and cyber attacks.
• Energy cost.
• Legislative and legal challenges in need of legislation capable of regulating the new monetary system in the best possible way.
• The problem of access by the entire population. This is the most important obstacle. The decision to definitively end cash should be taken with the total certainty that no citizen is left out of the payment system.

Is the eurozone ready to eliminate cash?

In the countries of the European Union, which is an area with high financial inclusion, the participation of citizens in the banking sector is high; although it also depends on the country itself. But, there are still many people who prefer the use of cash than using cards or the electronic banking system…