What is Digital Money?
Digital money refers to any means of payment that exists purely in electronic form, not a physical and tangible form like a dollar bill or a coin. This type of money is accounted for and transferred using online systems and broadly represents fiat currencies such as dollars or euros. You can exchange digital money via computers, smartphones, cards, and online cryptocurrency exchanges; in some cases, it can even be converted into physical cash through an ATM.
Key Highlights
- Purely Digital Form: Digital money is intangible and cannot be physically held or exchanged like traditional cash.
- Faster Transactions: It streamlines financial systems, making transactions faster and cheaper, especially across borders.
- Versatility: Includes digital representations of fiat currencies, cryptocurrencies, and stablecoins.
- Security Challenges: It remains susceptible to hacks due to its reliance on software and networking.
In-Depth Look at Digital Money
Digital money shares core attributes with physical cash; it acts as both a unit of account and a medium for daily transactions. For example, the money in your bank account essentially exists as digital entries made by your bank. When you deposit cash, the bank updates your digital account and reissues the physical money. Conversely, upon withdrawal, your digital dollars are converted into physical bills.
This setup speeds up transactions and reduces costs, particularly with cross-border payments. This has spurred interest among governments worldwide. For instance, Sweden has explored the idea of a cashless society thoroughly, and China has released its digital renminbi (e-CNY). Similarly, the Bahamas introduced the
Related Terms: electronic money, digital assets, virtual currencies, distributed ledger technology.
References
- Riksbank. “E-Krona”.
- China Research Center. “China’s Digital Currency: The Hopes and Fears of the e-CNY”.
- SandDollar. “About Us”.
- Board of Governors of the Federal Reserve System. “Examining CBDC and Wholesale Payments”.
- U.S. Department of the Treasury Office of Foreign Assets Control. “Questions on Virtual Currency”.
- CoinMarketCap. “Global Live Cryptocurrency Charts & Market Data”, Select All Coins.
- CoinMarketCap. “TopStablecoin Tokens by Market Capitalization”.
