The idea of a cashless society has been floated for many years. It wasn’t until Bitcoin was introduced in 2009 that the replacement of fiat currencies like the USD or EUR became a serious possibility. Today there are many cryptocurrency experts and also those who have little experience with digital currency who agree. Could cryptocurrency replace cash? Many say yes.
Cryptocurrency Vs. Fiat
In 2019 the US government accused China of manipulating its currency in response to US tariffs. This is not the first time that the Chinese government has faced such an accusation. Japan is also known to manipulate the value of its currency to its benefit. These are things that the average person hears very little about. Such incidents are an accepted part of a global monetary system where pieces of paper are assigned value and traded for goods.
Advocates of cryptocurrency as a replacement for cash are quick to point out that Bitcoin and other tokens are far less susceptible to manipulation. This is because cryptocurrencies are decentralized and unregulated. They can be used on a global scale without the need for currency conversion. In many ways digital tokens would level the playing field among countries as they trade with one another for goods and services. Cryptocurrency would also make it easier for some people to work and get paid without the need for a traditional bank.
The digital nomad is a reality in today’s world. There are people who travel the world while freelancing out their skills in writing, photography, web design, marketing, and more. These people would greatly benefit from a global currency. They would not have to pay fees for currency exchange, and they could accept clients in more areas where other forms of payment would be impossible.
On a political front, many countries have adopted or are considering the idea of a universal basic income. In this type of program all individuals are guaranteed a minimum amount of money each month to meet their basic living expenses. Many believe that cryptocurrencies would offer better support for such programs than fiat. In fact, some programs have already begun to experiment with crypto for the purposes of distributing a universal basic income.
If cryptocurrencies could replace cash there would also be less of a need for intermediaries like banks and credit card processors. Some payment platforms could be eliminated. The elimination of these third-party institutions could work to lower the overall cost of financial transactions for businesses. That could result in businesses passing on the savings to consumers in the form of lower prices.
There Are Challenges to Consider
With anything that sounds good in theory comes challenges to practical application. Could cryptocurrency replace cash? It could if it is able to overcome some basic obstacles.
Perhaps the greatest challenge is a need to develop a functional infrastructure that would allow an easy migration from fiat to cryptocurrency. Economies sometimes do not respond well to changes involving money. The concern among many people is that cryptocurrency could gradually outpace fiat. As it does so there will still be those who cling to cash. Cryptocurrency will strengthen, causing fiat currencies to become devalued. That could have a drastic impact on those who are holdouts against a cashless society.
The transition is what has some people concerned. Many questions arise. How would those with fiat convert it to the new system of cryptocurrency? How would such a transition affect established financial institutions who are still needed to play a vital role in the economy? These are all things that have to be considered before a formal change is made.
What is more likely to happen in the opinion of some insiders is that cash could die a slow death over a period of the next ten to twenty years. It would become subject to a progressive extinction as cryptocurrencies are embraced by more people. As that financial evolution is occurring the infrastructure to support it will also be growing. The final transition might not be as painful as people think it will be.
There would surely be a governmental impact to consider. Under the system of fiat a government can print money in response to financial pressures. This, of course, is almost always a bad idea that ultimately plunges a society into a recession. Cryptocurrencies cannot simply be created in this manner as a type of bailout. Digital tokens are also not subject to government regulations in the same way fiat is controlled, but this could ultimately become a reality for some parts of the world.
If society were to move toward using Bitcoin as a form of currency, there would be some type of reaction by governments in an attempt to regulate its usage. Many believe that Bitcoin and other tokens are specifically designed to resist such interference.
Just 20 years ago very few people could imagine a world where someone could buy goods with a digital form of money that has no physical existence. In 20 years from now we could look back and realize that few people truly believed cash was on the verge of extinction. Cryptocurrencies have changed the financial landscape of the world, and that landscape is being explored by innovators and financial revolutionaries.