– why do we need physical dollars and coins? Wouldn’t it be cheaper for the system as a whole to have the dollar be an entirely digital currency and wouldn’t this be better on the environment?
In: Economics
This is largely a political issue, the common counter argument is privacy. I can give you cash for a transaction, and it is a lot harder to trace that transaction back to me – you need some sort of receipt. Which is why receipts have become less popular with the rise of digital currency.
If you go straight to a digital currency, then you save money and carbon footprint (in theory, who knows how much more computing power or energy we would need) but you give up your privacy. Banks could pretty much track ever transaction, and because they are chartered by the government – the government reserves the right to grab transaction data for investigations.
Source: I run a data analytics department in a mid-size financial institution, and will often work with our compliance teams to ensure the FBI/IRS/OCC or whoever stays happy.
As a side note; this argument is not nessecarily mine, it’s just what I heard. I love using transaction data for marketing algorithms, I found a ton of success in my career by developing personas based on where and how you shop. But there is a trade off to personal liberty.. but maybe this could be solved using cryptocurrencies.. but those are problematic for their own reasons still.
Edit: i read some others reponses.. Unbanked really isn’t an issue here. I started my career with institutions targeted the “unbanked”. The supply side exists to bank them, it’s just they prefer cash and thus can’t make the business profitabitable without using predatory fees.
Also, many countries are already on the verge of making the transition already.. but their track records for personal liberty is not the best. India is set to switch to digital is they haven’t already.
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