We are now on the threshold of another age of upheaval. Cash is on the way out, and the digital technologies that are changing it can change the nature and capabilities of money. Today, central-bank finance serves as both a unit of account, a medium of exchange, and a storehouse of value. But digital technologies can lead to the separation of those functions as certain forms of private digital money, including some cryptocurrencies, gain traction. That shift could weaken the central-bank monetary dominance and start another wave of currency competition, which could have lasting consequences for many countries ખાસ especially those with small economies.
In ancient societies, things like oysters, beads and stones served as money. The first paper currency appeared in China in the seventh century, in the form of certificates of deposit issued by reputable merchants who supported the value of notes with a store of commodities or precious metals. In the 13th century, Kublai Khan introduced the world’s first unbaked paper currency. The bills of his empire were worth only because Kublai ordered that everyone in his domain must accept them for payment on the pain of death.
Kublai’s successors were less disciplined than controlling the issuance of paper currency. Subsequent governments in China and elsewhere have been tempted to print money recklessly to finance government spending. Such inconsistencies usually lead to an increase in inflation or extreme inflation, which in turn leads to a sharp decrease in the quantity of goods and services that can be purchased by a given amount. This principle is relevant even in modern times. Today, it has confidence in the central bank that guarantees wide acceptance of its notes, but this confidence must be maintained through disciplined government policies.
For many, however, cash now seems largely anachronistic. Literally managing material money has become less and less common as our smartphones allow us to pay easily. The way people in rich countries like the United States and Sweden, as well as the residents of poor countries like India and Kenya, pay for basic purchases has changed in a few years. This shift may seem like a potential driver of inequality: if cash disappears, one imagines that it could deprive the elderly, the poor, and others of technological disadvantages. In practice, however, cell phones are almost saturated in many countries. And digital money, if implemented properly, can be a major force for financial inclusion for households with little access to formal banking systems.
There is still little creature in the cash. During the Kovid epidemic, contactless payments became more prevalent, but U.S. Demand for this specialty has grown significantly as a result of recent corporate scandals. Many states in the U.S. have laws to ensure that cash is accepted as a form of payment, which will protect people who cannot or do not want to pay through other means. But consumers, businesses and governments in general have welcomed the transition to digital forms of payment, especially as new technologies have made them cheaper and more convenient.