Ahead of Davos, What Can Cash Teach Us About Crypto?

Published on by Coindesk | Published on

Are these comments about cash or cryptocurrency? It is a little hard to say.

The similarities between the two represent an uncomfortable truth, particularly when you consider that many of the parties who have leveled such criticisms at cryptocurrencies over the last three years have been the issuers and defenders of cash itself: central banks.

For the last hundred years, physical cash has been central to the global financial system.

Ahead of his time, economist Ken Rogoff wrote in 2014 in "The Costs and Benefits to Phasing Out Paper Currency" that roughly 10 percent of the U.S. Federal Reserve's M2 money supply was held in paper cash.

Physical cash can perform many wonders that digital forms of money have never been able to offer.

Cash is more immune to seizure from banks and governments than a savings account.

Perhaps most importantly, cash enables those who do not have access to bank accounts an ability to save and transact in their local currency.

Digital payments systems, from AliPay to Zelle, are replacing the use of cash.

Facebook's Libra project has been framed by Mark Zuckerberg himself as a direct answer to China's digital cash systems, both existent and emerging.

Cryptocurrencies have much in common with that other product that has long been a central part of the global financial system: cash.

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