Central banks, including the Federal Reserve, are printing more paper money than ever before. But Eswar Prasad, an economics professor at Cornell University and former director of China at IMF, believes that cash is out of date and could disappear within a decade.
Prasad recently published a new book, the Future of money: how the Digital Revolution changes money and Finance (The Future of Money: How the Digital Revolution is Transforming Currencies and Finance), which provides a comprehensive discussion of financial technology, encrypted assets and central bank digital money (CBDC). The economist said the research at the time of writing the book made him optimistic about our digital future.
Prasad believes that innovation will bring more people into the formal financial system, making these services cheaper, even for low-income people. Prasad admits that this is risky, such as the loss of privacy when people buy everything with digital footprints, and some people may be deprived of their rights as physical cash is replaced by digital payments. But overall, he thinks the future of digital finance will be better than people know.
When it comes to whether cash will disappear, Prasad said: "it's hard to imagine that cash will still be a viable medium of exchange in the world in the next five to 10 years, depending on which country you're talking about."
"I think the reason is that even if consumers prefer to use cash, it is a hassle for companies to use cash," he said. They have to deal with cash. They have to make changes. They have to save cash. Cash is easily lost and stolen. As a result, we have seen that companies around the world are more likely to turn to digital payments. So I think that once there are more choices for businesses and consumers, the willingness to use cash will decline more quickly. So it's hard to see a viable future for cash. "
So does this mean that people will use central bank digital currency (CBDC)?
Prasad says it depends in part on the structure of the CBDC. "if the structure of the digital dollar is like this, each of us has a central bank digital wallet that can be easily used for transaction purposes, and if it can be operated across payment systems, it means that no matter what payment system a merchant may have, it is easy to pay." I think this will definitely prompt us to use CBDC. "
Prasad added: "the establishment of CBDC may force other types of payment providers, including debit and credit cards, Apple Pay, PayPal Holdings Inc, etc., to become more efficient and reduce costs. So, to some extent, we may enter a brilliant future of very simple, low-cost digital payments. "