Economics in a picture
The payments market has seen the emergence of new forms of digital currency
Digital currencies differ in terms of degree of access and associated guarantee. Digital currency accessible to everyone has been offered by the private sector, mainly through bank deposits, and to a lesser extent by e-money. New digital private crypto-assets solutions have emerged, but their use in payments is reduced. In the future, the possible decline in the use of cash and the over-reliance on private solutions may impact on the security and efficiency of payments, financial stability or monetary policy. Emerging private digital currencies pose opportunities and risks that should be addressed.
The first dimension of policy response can be based on enhancing existing payment systems. Another dimension of policy response relates to the need to provide a sound and stable regulatory environment for market innovations, with particular emphasis on crypto-assets. Finally, the central bank may decide to issue of a new form of central bank digital currency, accessible to all economic actors, which ensures that cash features are ‘shifted’ to a digital environment. In this context, several initiatives are under way in the EU, and the Eurosystem has started to study the possibility of issuing a digital euro.
Prepared by Carlos Martins. The analysis, opinions and results expressed herein are those of the author and do not necessarily coincide with those of Banco de Portugal or the Eurosystem.
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