Digital currencies have been gaining traction in recent years. It started with Bitcoin and today there are hundreds of cryptocurrencies. Everything from stable coins to tokens that are designed for a specific purpose. However, the most interesting one is Central Bank Digital Currency. While the traditional cryptocurrency community prefers a truly decentralized currency that is anonymous, in order to analyze the implications of a digital currency, digital currencies issued by central banks should be the area of focus.
Digital currency is essentially cash (physical paper money) in a digital form. So it is not “money in the bank”. It is coins in a wallet. In this case, digital coins in a digital wallet. Paper money and coins have a manufacturing cost associated with them. The United States made pennies with copper. But when copper became expensive, people started to melt the pennies and sell copper extracted from them. This was later criminalized. Today the penny is not pure copper. But the high cost of minting them persists. There has been a debate to round off prices for goods and services to the nearest 5 cent amount as the US loses money for each penny that is minted. Digital money almost eliminates this cost.