Will cash disappear?

Will online payment methods make cash disappear?

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With the rise of online payment methods, many people are starting to worry about the end of cash.

Experts predict that the adoption of central bank digital currencies, which is expected to occur in several countries in the coming years, will pose difficulties for emerging market currencies.

The implementation of these currencies could cause the economy of some nations to undergo a process of digital dollarization.

But what impact will this have on our lives? Will cash be completely replaced by cards and other more technological payment methods?

Continue reading to understand more about the subject.

Will paper money end in Brazil?

There are several ways to make payments and transfers without touching banknotes and coins.

credit card, debit, PIX, digital wallets and QR Code, are some of the payment methods that have reduced the use of cash.

But is it really that simple? Will money only be found digitally in the future?

First of all, it is important to remember that a a large part of the population does not have access to the internet.

In fact, in rural areas, the number of Brazilians without internet exceeds 50%.

For this reason, in these regions, online payment methods are far from being a reality for the entire population.

Certainly, the use of physical money will decrease in the coming years. But that doesn't mean it will disappear completely.

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Cryptocurrencies: How do they impact the use of money?

Cryptocurrencies are fully digital currencies.

They are not issued by any government, as is the case with the dollar and the real, for example. In other words, cryptocurrencies are not controlled by any Central Bank.

Of all the cryptocurrencies, the best known is Bitcoin. But she is far from the only one.

In fact, the concept of digital currency came well before Bitcoin. Cryptocurrencies were first described in the 1990s by Wei Dai, who suggested using cryptography to manage transactions made with a different type of money.

This process would make the existence of a central authority unnecessary, which is what happens with traditional currencies.

And when we talk about the end of cash, cryptocurrencies are always mentioned.

Although they are not yet accepted in most establishments, everything indicates that in the future, they will become part of the daily lives of the world's population.

Cryptocurrencies can be used for the same purposes as physical money: commercial transactions, store of value, etc.

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Is it possible for countries to create their own digital currencies?

As you already know, current cryptocurrencies are not controlled by any Central Bank.

However, many countries are already thinking about creating their own digital currency.

Since the first cryptocurrency began to be used, the digital assets market has undergone several changes. 

The digital currencies by a Central Bank are called CBDCs (Central Bank Digital Currency).

This is precisely the main difference between CBDCs and traditional cryptocurrencies: they represent an asset controlled by the government.

In other words, just like paper money, they are not decentralized and traded in a mining environment, which is what happens with Bitcoin and other cryptocurrencies.

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What might happen if countries don't create their own digital currencies?

If central banks in major countries like the United States are slow to adopt digital versions of their own currencies, decentralized crypto assets could grow even more.

In other words, these decentralized cryptoassets will conquer a large share of the market in monetary transactions, even with the creation of new assets.

But there are a few reasons why some countries are still considering the possibility of adopting their own CBDCs.

The first reason is that if Central Banks move very quickly to implement a digital currency, they could create a low-cost payment system.

This would obviously be great for the financial inclusion process. The problem is that it could stifle innovation in the private sector payments system.

The second reason is that the creation of centralized digital currency accounts can lead to financial disintermediation.

With the extreme reduction in the use of physical money, the world's population could live in a reality in which all financial transactions will be controlled by a Central Bank or a payment provider.

This would cause problems regarding people's privacy.

3 reasons to believe that the use of cash will decrease

As you can see, despite all the technological advances, it is very difficult to make cash disappear completely.

After all, this could bring difficulties for a large part of the world's population and for emerging countries.

However, due to current online payment methods and the growth of cryptocurrencies, we can say that the use of cash will actually decrease in the near future.

And these are some of the reasons why countries and economists believe in this theory. Take a look:

• Paper money is expensive: The cost of producing cash is very high. In 2019 alone, the Central Bank spent more than 90 billion on the transportation, storage and security of banknotes. 

• Digital payments continue to grow: Have you ever stopped to think about the number of digital payment methods that have emerged in recent years? The considerable increase in digital payments is a sign that the circulation of physical money will decrease.

• Creation of the Digital Real: According to the president of the Central Bank, in 2022, Brazil's first digital currency will be launched, the Real Digital.

Conclusion

The advancement of technology in the payments sector, the appreciation of more conventional cryptocurrencies such as Bitcoin and the creation of centralized digital currencies will certainly cause the use of cash to decrease.

However, physical money is still very important and it is not going away any time soon!