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FEATURE Crypto Weekly
Money-Replacing Innovations are on the Horizon, Says 'Future of Money' Economist Eswar Prasad Cash will not always be king, according to economists. Eswar Prasad, an economist with CNBC's Make It, says the Covid-19 pandemic accelerated the shift toward digital and contactless payments and led to a wider acceptance of physical cash alternatives, such as cryptocurrency. Prasad, author of "The Future of Money," writes, “If concerns about the tactile nature of cash receded, most consumers and businesses who switched to digital payments would be unable to return.” Professor Prasad, a professor of trade policy at Cornell University, a fellow at the Brookings Institution, and the former chief of the IMF's China desk says, "The era of cash is ending, and the era of central bank digital currencies is starting."
April 2022 | Volume 23
According to Prasad, “Cryptocurrency, stablecoins, central bank digital currencies (CBDCs), and other digital payment systems will decrease the use of physical cash. However, one technology alone will not replace it. Cryptocurrencies by themselves will not replace it. Stablecoins may have more chance, but their reach may be limited," he says. Ideally, a CBDC would be "widely available."
Below are a few details about each. (CBDCs) Digital Currencies Issued by Central Banks As Prasad points out, several central banks are experimenting with CBDCs, but most are at an early stage. CBDCs are digital versions of banknotes that a central bank
backs. Chinese, Japanese, Swedish, and Nigerian CBDC trials are underway, and the Bank of England and European Central Bank are planning their own trials. The Bahamas launched its first CBDC, the sand dollar. Despite the uncertainty, U.S. Federal Reserve chair Jerome Powell has said the central bank is thoroughly studying the possibility of developing a CBDC. Each CBDC uses a different technology, depending on the country and its central bank. In some cases, CBDCs use distributed ledger technology, which is a type of database that can store multiple copies of financial records, such as transaction histories, across multiple entities. Central banks can manage these entities overall. Since CBDCs are controlled by one entity, a central bank, they
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