Think of the early years when people exchanged goods for goods and how things have changed since then. Paper currencies were introduced and people could now pay for things. Today, all that has metamorphosed into what is popularly referred to as digital currencies. Indeed, there is no end to what the future of money will look like, especially with the role technological advancement is playing.

The world is undergoing a radical revolution thanks to changes and advancements in technology. Some of these changes affect money, circulation, how it is now being spent, and, more significantly, its digitalization. The future of money in a digital world is a topic that concerns everyone, not just specialists and experts. Each one of us is involved in the changes going on in the financial system one way or another.

Once upon a time, all we had to spend was cash; the advent of debit or credit cards and internet banking, among others, wasn’t in existence. Today, anyone can buy XRP and any other cryptocurrency to carry out transactions. So the world is changing; it makes sense that the role and nature of money are, too.

What Cryptocurrency Is and Isn’t

Cryptocurrency is money in the digital or electronic format; it provides a more secure way of performing transactions. Authorities do not control cryptocurrency; those who hold assets in the cryptocurrency market own and control them. Therefore, many naturally assume cryptocurrency would, someday, replace fiat currency – but that is not to be. Instead, cryptocurrency exists to complement fiat currency, not replace it; it provides easier, more convenient access to money.

No matter how widely accepted crypto assets get, certain characteristics, its volatility for one, make fiat currency replacement impossible.

How Cryptocurrency is Transforming the Banking System

Banks are wary of adopting cryptocurrency into the financial system for obvious reasons: its decentralized nature, KYC process, and volatility. Despite the system’s reservations about cryptocurrency, it benefits the institution and its customers. Besides, banks need to find a way to accept and work with this new technology to avoid being left behind. More so, if banks would see cryptocurrency as a friend, not an enemy, they’d see the many benefits it brings to the table.

Financial institutions embracing cryptocurrency could mean upgrading and enhancing financial services, among other promising benefits. For example, banks can put measures to bring the risks in Bitcoin down to the barest minimum. Financial institutions can provide security for digital currencies from fraud, hacks, and thefts. In addition, the banking system getting involved in crypto assets can help reduce the criminal activities associated with them.

The Need for a Digital Currency System

Digital currency can provide more stable and orderly conduct of performing transactions and making payments in the digital world. The pandemic has opened the world to a system of cashless transactions; our methods of making purchases are changing.

We make transactions online using cards and apps on our smartphones, and we do online shopping for goods and services, including food and clothing. As such, cash purchases are declining and, if things continue this way, banknotes would soon become a marginal payment means.

Some may say cryptocurrencies like Bitcoin and Ethereum will become redundant but only because they fail to recognize the central role of money in the economy. Banknotes would soon lose their central role in the digitized world. The banking system needs to establish a digital currency system to ensure that they are still usable as payments anchors.

We live in a world where everyone wants comfort and that’s what you get with digital currencies. You don’t have to walk the extra mile or join a long queue to get your cash or make payments. With cryptocurrencies like Bitcoin, Ethereum, and USDT/Tether, all that can be done on your mobile device from the comfort of your home.

Digitalization of Fiat Currency in the Future

The world is getting accustomed to using forms of private digital money such as internet banking, online transfers, cards, and apps on phones. The Central Bank recently issued and pushed for a possible introduction of digitalized fiat currency. Digital money gives citizens the same access they have with physical banknotes. It would be available to anyone and everyone: individuals, families, businesses, everyone.

It should, however, be noted that this move would have significant consequences on economic and financial systems, to mention a few. For one, the transmission of monetary operations, its policy, and stability, for instance, would be affected. The banking system viewing cryptocurrency as a partner rather than competition would make things easier. The cryptocurrency market and the banking industry have significant roles to play for each other. For one, banks can provide assurance and security to the cryptocurrency market’s unregulated environment. On the other hand, cryptocurrency adoption in the banking system can take it to a greater level of efficiency and innovation.