The rise of digital currencies is threatening the ‘demise of cash’. For this reason, there are potent discussions for central banks to consider giving digital money. However, a few concerns like how central banks can get digital money into the economy and how the public can use it. What its advantages would be, and whether the 꽁머니 can haveany positive or negative impact on the financial stability.
Below are a few of the advantages associated with the use of digital money.
- It broadens the monetary policy options
Implementing cyber money can enable new monetary policies to be effected. If digital money replaces physical cash, this can enable a reduction of interest rates to zero.
- It can secure the financial system
Letting people, private institutions, and non-bank financial entities directly settle bank money lowers the consolidation of credit risks and assets in transaction systems. This then reduces the general significance of large banks. Additionally, having a truly risk-free option to bank deposits, a transition from deposits to cyber꽁머니lowers the requirement for government guarantees on funds, eradicating moral decay from the financial structure.
- It can promote development and competition in the payment procedures
Implementation of digital currency use would make it remarkably easier for new entries to the payment section to facilitate payment accounts and bring competition to the available banks. It would also minimize the urge for lesser banks and other organizations to make their transactions through the main banks.
- Cyber money can help deal with the outcomes of alternative finance
Non-bank institutions are contesting with banks and acquiring a larger portion of total lending. This has effects on money distribution and creation. When a bank offers a loan, it makes new cash for the borrower whereas when non-bank organizations give a loan, they just transfer preceding cash from a saver to a borrower, they don’t create new cash. Issuing digital cash can help banks compensate for any change in loaning away from money-making banks.
- It can enhance economic inclusion
The agencies giving cyber꽁머니accounts can initially become payment service providers while banks are creditors. Cyber money account providers can therefore give accounts to clients excluded from accessing traditional banking services.
Drawbacks of Using Digital Money
Although digital money has numerous advantages, a few drawbacks can as well be attributed to it as explained below.
- The cash is non-traceable
Since digital money uses the internet, it becomes hard to trace it thus creating anonymity of the system. This can be either good or bad. For instance, criminals can launder money to various countries using the system. Non-traceability is a huge challenge for legal authorities and governments.
Cyber money systems pose some exemplary dangers. Since money is electronic, hackers can hack into the system and make more coins even if they have paid nothing to get the money. When extra coins are created, the value of existing coins in the system reduces thus affecting both the banks and users.