December 13, 2015

...AND CHEAPER...:

Central Bankers Explore Response to Bitcoin: Their Own Digital Cash (RYAN TRACY, Dec. 9, 2015, WSJ)

Central bankers' interest in digital currency is an inevitable reaction to the rapid shift away from physical cash. The existing payment system is electronic, but money is stored centrally in bank accounts and verified via payment networks, which add cost along the way.

A digital currency, on the other hand, would be like a bit of encrypted computer code "minted" by a central bank. It would carry with it all the necessary information to validate its value. That means in a sense it could move around with users and merchants.

​For instance, today a consumer might hold $10 of digital cash on a debit or gift card issued by a bank or a retailer. That $10 can only be spent where the card is accepted. But if that card held $10 in digital currency backed by the U.S. Federal Reserve, its owner could, in theory, spend it anywhere.

The prospect is appealing to central bankers for a litany of reasons. On a practical level, they could save money on printing physical cash. Mr. Dharmapalan says minting and distributing digital currency would cost 10% of what it costs to print and distribute an equivalent physical currency note while allowing the government to retain the revenue it gets from issuing currency, known as seigniorage.

Central bankers also might find appealing the ability to better track transactions, since cash transactions are anonymous and susceptible to illicit uses.

Posted by at December 13, 2015 8:02 AM

  

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