What If Central Banks Issued Digital Currency?

What If Central Banks Issued Digital Currency?

Over 97% of the money in circulation today is from checking deposits – dollars deposited online and converted into a string of digital code by a commercial bank. The digitization of credit and debit card transactions and the development of banking apps has moved many traditionally cash-based transactions into digital space.

So far, the shift to digital has left the banking business relatively unscathed, at least in the West, where new players such as Paypal still rely on customers linking the service to their bank debit and credit cards.  A few online-only banks have materialized, such as Chime and Nubank, but, again, these ride on existing rails. The Chinese financial sector has seen more disruption, as illustrated by the emergence of Alibaba’s Ant Financial and Tencent’s WeBank, which have leveraged looser data privacy protection and smart data analytics to dominate consumer payments and have also entered retail and small business banking. Broadly speaking, though, traditional banks have adjusted well to the digitization of money.

That could be about to change.