We are at the threshold of another era of upheaval. Digital technologies that are replacing cash could change the nature and capabilities of money. Central-bank money is a unit of account, a medium of exchange, and a store of value. Digital technologies could lead to the separation of functions from private digital money. That shift could weaken the dominance of central-bank money and set off another wave of currency competition, one that could have lasting consequences for many countries.
Money was served by objects such asshells, beads, and stones. The first paper currency in China was issued in the form of certificates of deposit, which were used to back the notes. The world's first unbacked paper currency was introduced in the 13th century. His kingdom's bills were worth something because everyone in his domain had to pay for pain of death.
His successors were less disciplined than he was. Governments in China and other countries gave in to the temptation of printing money. Such wantonness can lead to a rapid fall in the quantity of goods and services that a given amount of money can buy. This principle is still relevant in modern times. Trust in a central bank that ensures the widespread acceptance of its notes must be maintained through disciplined government policies.
Cash seems anachronistic to many. As our phones allow us to make payments quickly, we are less likely to handle physical money. The way in which people in wealthy countries like the United States and Sweden pay for basic purchases has changed in the last few years. If cash disappears, one imagines that the elderly, the poor, and others will not be able to use technology. Cell phones are almost at saturation in many countries. Digital money could be a big force of financial inclusion for households with little access to formal banking systems.
Cash has some life left in it. The demand for cash increased in major economies, including the US, as people viewed it as a safe form of savings. Many states in the US have laws in place to make sure that cash is accepted as a form of payment, something that would protect people who cannot or do not want to pay with other means. Consumers, businesses, and governments have generally welcomed the shift to digital forms of payment, as new technologies have made them cheaper and more convenient.