Viewpoint: The future of money

30 AUG,2021 | MEDC


 

  • While the traditional financial system has helped globalize the world economy, its ability to handle cross-border trade and investment has reached a saturation level. This is precisely where digital currencies enter the picture. With the advent of volatile cryptocurrencies like Bitcoin, Central Bank-issued Digital Currencies (CBDCs) are beneficial to the general public not just for the convenience they create in payment systems, but also for countering the negative effects of private virtual currencies. These innovations are already a reality, and growing rapidly. According to IMF data, CBDCs are being closely analysed, piloted, or likely to be issued in at least 110 countries. If anything, India is somewhat late in joining the list of countries considering the launch of a government backed digital currency.
  • Making the digital money revolution work for all is easier said than done. Digital money must be designed, regulated and provided, so that governments maintain control over monetary policy to stabilize prices, and over capital flows to stabilize exchange rates. These policies require expert judgement and discretion and must be taken by autonomous institutions. Payment systems should grow increasingly integrated across countries, and not be limited to regional blocks. Even within countries (especially emerging economies) it is important to avoid a digital divide between those who gain from digital money services and those who don’t. A digital currency cannot fulfil its socioeconomic objectives amidst growing inequality.
  • Digital currency also has implications for domestic economic and financial stability. Both public and private sectors need to work together to provide money to end-users, without compromising the stability and security of the system. Banks could come under pressure as specialized payment companies vie for high-end customers and their deposits, but credit provision to the smaller players must be sustained at all times. Also, fair competition must be always upheld – which is not an easy task considering that large technology companies are also entering the world of payments. Government should also leverage digital money to facilitate the transfer of welfare benefits to the bottom of the pyramid. Digital currency offers scope to boost financial inclusion by decreasing transaction costs in the economy.
  • New forms of money must remain acceptable at all times. Regardless of the government in power, they must protect the wealth of consumers, be safe and deeply rooted in sound legal frameworks, and avoid any form of unethical transactions. Choosing the right path now is critical, as backtracking later can prove costly. This is where regulation will have a vital role to play.
  • The challenges are significant, but so are the potential rewards. However, policy action must begin immediately. This is the time to formulate a common vision for the future of a world of digital currency and to strengthen international collaboration. Government needs to enact policies and establish legal and regulatory frameworks that will drive digital innovation for the benefit of all citizens, ensuring that no one gets left behind in this monetary revolution.

*Photo Credit: Google

Comments



Featured Posts



Recent Posts


EMERGING ISSUES IN AEROSPACE INDUSTRY: AN INDIAN PERSPECTIVE


Tourism and its contribution to the Economy


Interactive Meeting with Mr. Jaykumar Rawal Hon'ble Minister for Tourism & Employment Guarantee Scheme Govt. of Maharashtra


De-coding skills-based pro-bono


FOOD PRICE VOLATILITY


Food Inflation in India: An Assessment




Archive




© Copyright 2019 MEDC, All rights reserved
Website Design and Develop By: SCI Knowledge Interlinks