Decline in Cash Usage and Rise of Digital Payments: Impact on Central Bank’s Assessment of CBDC

03/27/2023 11:40 • Crypto & Markets • 68 views

According to reports, Signe Krogstrup, President of the Danish National Bank, discussed some of the impacts of the decline in cash usage and the rise of digital payments on the central bank’s assessment of CBDC. In his speech, Signe Krogstrup pointed out that the decline in cash usage does not necessarily justify the issuance of retail CBDC. This shift is an important trend at the core of the central bank’s monetary and financial stability tasks. In fact, between 2017 and 2021, Denmark’s cash disbursement ratio decreased from 23% to 12%. In contrast, digital payments have risen to nearly 90%.

President of the National Bank of Denmark: Low cash utilization does not justify the issuance of retail CBDC

Introduction

The use of cash is on a decline worldwide, and digital payments are on the rise. This change in payment behavior has a significant impact on the central bank’s assessment of central bank digital currency (CBDC). In a recent speech, the President of the Danish National Bank, Signe Krogstrup, discussed how this shift is affecting the central bank’s monetary and financial stability tasks.

The Decline in Cash Usage

According to Signe Krogstrup, Denmark has seen a significant decline in cash usage over the past few years. Between 2017 and 2021, the cash disbursement ratio decreased from 23% to 12%. This trend is not unique to Denmark but is seen in other countries as well.
There are several reasons for the decline in cash usage. One of the biggest reasons is the increased use of digital payments. When people have the option to pay digitally, they often choose to do so because it is more convenient and faster. Additionally, people are increasingly wary of carrying large sums of cash due to security concerns.

The Rise of Digital Payments

The rise of digital payments has been remarkable. In Denmark, digital payments have risen to nearly 90%, mirroring trends in other countries. These digital payments include payments made using debit and credit cards, mobile wallets, and other forms of electronic payments.
Digital payments offer several advantages over cash payments. They are faster, more convenient, and provide greater security. Electronic payments are also highly traceable, which can help combat fraud and money laundering.

The Impact on Central Bank’s Assessment of CBDC

The shift away from cash usage and towards digital payments has a significant impact on the central bank’s assessment of CBDC.
CBDC is a digital currency that is issued and backed by a central bank. It is designed to be a safe and reliable way of making payments that is not subject to the fluctuations of the market.
While the decline in cash usage does not necessarily justify the issuance of retail CBDC, it is an important trend that the central banks need to consider. CBDC could be an alternative to cash, providing people with a digital currency that is backed by the central bank.
The rise of digital payments also provides central banks with a glimpse into the future. As more people move away from cash, central banks must adapt to provide people with safe and secure payment options.

Conclusion

The decline in cash usage and the rise of digital payments have important implications for the central bank’s assessment of CBDC. While this shift does not necessarily justify the issuance of retail CBDC, it is an important trend that central banks must consider. As more people move away from cash, central banks must adapt to provide people with safe and secure payment options.

FAQs

1. What is CBDC?
CBDC stands for Central Bank Digital Currency. It is a digital currency that is issued and backed by a central bank.
2. Why are people moving away from cash?
People are moving away from cash because digital payments are more convenient, faster, and provide greater security. Additionally, people are increasingly wary of carrying large sums of cash due to security concerns.
3. Will CBDC replace digital payments?
No, CBDC is not designed to replace digital payments. Rather, it is an alternative to cash, providing people with a digital currency that is backed by the central bank.

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