If the US dollar becomes a digital currency. Why would I ever deposit any of my money into a bank when I could just put it into my digital wallet to be transferred to? Wherever I decide it needs to be transferred just like I would with any other digital currency?
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Banks might pay you interest, unlike your wallet. They need deposits to make loans, which is where the real money is made.
A bank would have the benefit of giving you interest payments and make it easier to set up recurring payment methods. Other issues could stem from the wallet itself depending what exactly you meant.
Banks would not only be able to offer you interest, but your money would also be FDIC insured ($250,000 per account), with just a digital wallet, if you somehow lose it, forget the password, or if someone else steals it, you really don’t have any recourse. However if someone steals your money from a bank, or you forget your password then you’d still have your money.
That’s one of the downsides of a decentralized currency, if there’s no central authority then there’s no one that can help you if you lose your wallet or forget your password. You’re effectively holding bearer bonds, it’s the difference between having a spare credit card in your car with a max spending limit of $5,000 vs having $5,000 in cash just lying in your car.
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You wouldn’t be able to store your money in a digital wallet that’s independent from banks.
That is, unless the new digital USD operates on a technology like blockchain.
The system that we have now is that your “wallet” is a bank account, operated by a bank. They keep track of your money and they are trusted by you and others to not lie about how much you have.
If you could have a fully independent digital wallet, nobody could be sure that you didn’t add a few zeroes to the end of your balance.
The reason why digital wallets work with blockchain based currencies like bitcoin is that everyone keeps track of everyone else’s account history.
So if I get a bitcoin, you and every other person who has a wallet will know about it. This is why I can’t trade with a forged wallet, because every account is essentially public.
Because you’d get interest. Your digital dollar is just a digital dollar. It just sits there. If you put it in a bank account, the bank can lend it out and you get some of the interest.
Right now, interest rates are very low. But that’s not always how it worked. Interest rates are low right now because the central bank is giving the banks lots of money to lend out, so the banks don’t need yours (and this is arguably fucking up the economy). If they stop doing that, interest rates will be higher, like 5-10%. You could get paid $100 just by having $1000 in your bank account for a year.
The U.S. dollar is already primarily a digital currency, 92% of them exist on a computer rather than on paper.
If you’re asking what would happen if the U.S. dollar suddenly switched to some sort of blockchain, you might as well ask what would happen if the U.S. decided to switch to cheese as a currency. These two things would be equally insane and unlikely.
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