How will digital currencies impact the financial system?

Image: Reuters/Dado Ruvic Digital currencies are poised to have an impact on the financial system; about 86% of central banks are exploring the benefits and drawbacks of central bank digital currency. Leaders in blockchain came together at The Davos Agenda to discuss the required levels of regulation and prerequisites for financial inclusion.

What is digital money?

Digital money is the digital representation of value. The public sector can issue digital money called central bank digital currency —essentially a digital version of cash that can be stored and transferred using an internet or mobile application. The private sector can also issue digital money.

Could digital currency improve monetary policy?

There are potential challenges and implications for monetary policy, but benefits could include improved privacy standards around payments. Central banks around the world are exploring the case for central bank digital currency (CBDC) – essentially a digital version of cash (Nielpelt 2021).