What will the future currency look like? Industry insiders say official digital currency will become mainstream

Golden Finance - Digital Currency October 24th Market research organization Forex Bonuses recently ranked the world's top 10 countries in non-cash transactions. The top 6 are: Canada, Sweden, the United Kingdom, France, the United States and China.

Among them, 57% of payments made by Canadian residents are completed through non-cash methods, while the proportion in Sweden is 59%.

From a global perspective, "cashless" seems to be the general trend. At the same time, central banks in China, Sweden, Canada, the United Kingdom and other countries have successively launched research on legal digital currencies.

Does this mean that a cashless society is coming?

Why is “cashless” popular?

From 2007 to 2016, the average annual cash circulation in Sweden dropped from 10.5 billion kronor to 6.5 billion kronor. In 2016, the number of cash transactions in Sweden accounted for only 20% of all payments, far below the world average of 75%.

Now let's look at Denmark. Currently, Denmark has already achieved a high level of cashlessness. As early as 2015, 87% of Danish citizens aged 16 to 74 used online payment, accounting for 25% of their consumption.

In Scandinavia, which includes two countries (Norway in the west and Sweden in the south), residents use cash for less than 6% of their payments.

Why do Nordic countries favor "cashless" so much?

Cheng Lian, director of the International Finance and International Economics Research Office of the Institute of Finance of the Chinese Academy of Social Sciences, told China News Service: "Nordic countries have several purposes for promoting cashless transactions. The first is to reduce criminal activities such as anti-money laundering; the second is to use cashless transactions as a driving force for the development of the domestic financial technology industry; the third is to use non-cash transactions to reduce the costs of financial institutions."

If the Nordic countries have special reasons for promoting "cashless", then other parts of the world have more general motivations for promoting "cashless".

Dong Ximiao, a senior researcher at the Chongyang Institute for Financial Studies at Renmin University of China, told the China Times: "Cash transactions have some disadvantages, such as not leaving traces easily, not easy to trace, and high transaction costs. Reducing the use of cash is a goal that all countries are pursuing."

In his opinion, the increase in the proportion of non-cash payments has reduced the risks of cash use to a certain extent, reduced social transaction costs, helped prevent money laundering and corruption, facilitated people's lives, and promoted economic development.

Will cash disappear?

As countries continue to promote "cashless", will cash eventually be eliminated? Experts have different opinions on this.

Zong Liang, chief researcher at the Bank of China, said: "Overall, the use of cash will decrease, but completely eliminating cash in the short term may bring other problems. From the perspective of future development, we should still follow the direction of the times and gradually reduce the circulation of cash, while making reasonable arrangements to ensure the healthy operation of finance."

In Cheng Lian's view, the replacement of cash is an inevitable trend. He pointed out: "From the evolution of currency, we can see that the basic trend of currency is to become more and more convenient and faster. It is only a matter of time before physical currency is replaced by electronic currency. However, it is not ruled out that physical currency will still exist as a backup to keep the economic system running in case of major force majeure."

However, Dong Ximiao believes that despite the rapid development of non-cash payment methods, the demand for cash in circulation around the world is still large, and the demand for cash in some regions is even on the rise.

This phenomenon is particularly evident in China. The "China Payment System Development Report (2016)" released by the People's Bank of China shows that in 2016, cash in circulation in China (M0) reached 6.83 trillion yuan, an increase of 8.07% over the previous year.

Dong Ximiao pointed out that non-cash payment tools have an "incremental substitution" effect on cash settlement, that is, non-cash payments such as bank cards do not have a one-upmanship relationship with cash payments. While the scale of non-cash payment settlements is growing rapidly, the use of cash is also increasing.

Therefore, Dong Ximiao believes: "In the foreseeable future, cash will definitely still exist, because not everyone likes to use Alipay, WeChat Pay or bank cards. Some people are used to using cash. We must respect everyone's choice and give everyone the right to choose."

Cheng Lian further pointed out that, from the current perspective, there is no great technical difficulty in realizing a cashless society, and for many people it is a change in concept. "Many marginalized people in society are not very familiar with electronic technology, or do not like purely electronic forms. Once cashless is realized, they will be marginalized. This is an issue that needs to be considered."

What will the future currency look like?

Although there is still debate about whether cash will disappear, the fact that cannot be ignored is that central banks in many countries have started research on legal digital currencies.

Since 2014, the People's Bank of China has formed a team to study the issuance of digital currency; in order to defend the central bank's ability to control currency issuance, adjust currency turnover and thus regulate the economy, the Swedish Central Bank has also decided to develop its own digital currency "e-krona"; Japan is planning to launch its own national digital currency "J COIN" before the opening of the Tokyo Olympics.

It should be pointed out that digital currency is not the same as electronic currency or virtual currency. Dong Ximiao explained: "Digital currency is the digitization of legal currency and has the same status as paper currency issued by the central bank; virtual currency is not currency in essence, such as Bitcoin. According to the definition of the People's Bank of my country, Bitcoin is a virtual commodity."

Zong Liang also has his own ideas about digital currency. He told the reporter of Guoshi Direct Express: "From the perspective of the future, digital currency will be a combination of numbers, which may use distributed or blockchain technology, encryption algorithms, etc. For example, if you are given a set of numbers, you will get a sum of money, which has the meaning of currency. Electronic currency is still based on the RMB and is a token."

Zong Liang also pointed out that the launch of legal digital currency requires first a set of new technologies, including blockchain technology, encryption technology, etc.; secondly, a set of rules for the future issuance of digital currency must be formulated. This is not just a matter for one country, but also requires global coordination, such as central banks around the world and the International Monetary Fund.

Currently, countries are still exploring digital currencies. In addition to technical challenges, there are also controversies in terms of privacy.

Cheng Lian pointed out: "If digital currency appears, the government or commercial organizations engaged in related fields will have full control over all your privacy, because all your transaction activities are recorded in digital currency. In this sense, the other party can grasp all your economic activities, which is a big challenge to personal privacy."

In the face of these problems, digital currency is still moving forward. Cheng Lian pointed out: "From the current trend, the launch of legal digital currency may be faster than we think. Maybe in five to ten years, some countries will try to launch digital currency."