The Future of Money — CBDCs and What Comes Next

The arrival of Bitcoin, which we saw in the previous episode, cast no small ripple across the world of money. There could be money that relies on neither states nor banks — that very question quietly stirred the state, which had long monopolized the issuance of money. If a new digital currency made by private hands were to spread and people came to use it instead, the state’s power to support the economy through currency might grow weaker. Such concerns began to move the world’s central banks.

If so, why should the state not issue digital money itself? It was in this way that attention turned to the concept known by its initials, CBDC — central bank digital currency. As one possibility lying beyond the path money had traveled from paper to numbers, the world’s central banks set out to research and experiment.

Digital money issued by the central bank

A CBDC refers to a currency in digital form issued by a central bank. It may be easiest to think of it as banknotes and coins, which we use every day, issued directly in digital form by the central bank.

What matters here is the difference from the electronic money and code-based payments already in wide use. Many of those are services provided by private companies, and behind them, in the end, bank deposits or cash are being moved. A CBDC, by contrast, is said to aim for what one might call ‘digital cash,’ backed by trust in the central bank itself. How to pay when a blackout or disaster makes the network unusable, and how far to protect the record of who used how much — there are many issues yet to be solved, and countries are still at a stage of careful deliberation.

The world’s moves, and the advance of cashless payment

Efforts toward CBDCs differ greatly in pace and policy from country to country.

China advanced trials of the digital yuan early on and is counted among the countries said to be close to practical use. In Europe, preparations for the digital euro are reported to be proceeding step by step, and there are already countries and regions that have formally moved to issue one. On the other hand, there are countries reported to have shelved CBDC development and turned instead toward a policy of encouraging private digital currencies. The Bank of Japan, too, has accumulated conceptual studies and experiments, but it has not decided to issue one at present; it is said to take the stance of advancing preparations in readiness for future changes in the environment.

Apart from the fate of CBDCs, real-world payment is already tilting rapidly toward the digital. Paying simply by holding up a smartphone, and a life without carrying cash, are no longer rare. In the Nordic countries and elsewhere, there are nations said to have had cash all but vanish from everyday life. Japan’s ratio of cashless payment, too, rises year by year, and the shape of money across society as a whole is changing quietly but surely.

Even so, the view runs deep that cash will not vanish completely. The observation that when digital systems stop in a disaster or communications failure, the last thing one can rely on is the cash in hand. The reality that there are people who wish for payments that leave no record. The consideration that not everyone can handle digital tools. Reasons that cannot be settled by convenience alone keep cash in society.

Through 5,000 years, back to the first question

Here, let us look back over the long road we have walked.

From an age when shells and livestock carried value, the coins of Lydia took on the stamp of the state, and China, the first in the world, entrusted the role of money to paper. The merchants of the Renaissance gave birth to banking, the world was bound by a chain of gold, and in time that chain was cut, and money left the backing of gold behind. Paper became numbers, numbers raced across networks, and at last there appeared even money that passed through no state at all.

The form has changed this much. And yet, what flowed beneath it has, astonishingly, hardly changed at all.

Whether a future comes in which CBDCs are widely used, how far cash will remain, what place crypto assets will occupy — no one now holds those answers for certain. Technology advances at an astonishing speed, but the essence that money stands upon trust will, in all likelihood, not change in the days to come. Whether new money will win trust, or whether old trust will survive in a changed form — we are right now in the very midst of that fork in the road.

The story of money does not reach its conclusion here. It will go on being written, by what each one of us believes and accepts. The next time you hold money in your hand — be it a coin, a banknote, or numbers on a screen — if you can remember, just a little, that 5,000 years of trust dwell within it, then I believe this long journey will not have been in vain.

Thank you for staying with me all the way to the end.

【The Birth of Money: 5,000 Years of Currency — End】