4 Reasons Why Cash Won’t Die in the Medium Term at Least.

In the long term, the problem will be different.

The future of money will be digital. This is the message that seems to be sent to us by the powerful people at the head of the current monetary and financial system. In the wake of China, which already seems to have taken a significant lead with its digital yuan, more and more countries are working on launching their Central Bank Digital Currency (CBDC).

For fear of being left behind by China, America has already launched exploratory studies on the creation of a digital dollar. Sooner or later, this digital dollar will see the light of day. I don't know exactly what form it will take, but America will have to go there. It's the same thing in the European Union.

In contrast to these CBDCs, you have Bitcoin, which in my opinion will be the last bastion to protect your privacy and the fruits of your labor from censorship and confiscation.

All this leads some to imagine that cash will soon disappear. In my opinion, cash still has a long way to go and it will not die in the medium term. Here are 4 main reasons that lead me to believe this.

#1: The major central banks guarantee the use of cash for at least the next 10 years

Let's take the example of the eurozone. It is legally impossible for any country in this zone to abolish cash. The European Central Bank guarantees, at least until 2030, that “cash will continue to be widely available and accepted as a means of payment and storage”.

Even if a digital euro were to be created in the coming years, physical bills and coins will retain their payment function, the ECB assures. Here's what Christine Lagarde said in December 2021 on the subject:

“Euro banknotes will always be there. They are a tangible and visible symbol that unites us in Europe, especially in times of crisis, and their demand remains high.”

The situation is the same in America with the US Federal Reserve. Thus, cash will not be eliminated in the medium term.

#2: Cash remains an essential means of payment for vulnerable groups

One of the reasons why the ECB keeps cash despite digitization is its social function. There are still enough people who have difficulty paying digitally. Think of elderly people or people with low literacy skills. For them, it is difficult not to be able to pay with cash in some stores anymore, but also to see the number of bank branches and ATMs decrease.

Each country will work to make agreements with banks and other payment stakeholders to ensure that cash remains readily available as long as groups depend on it.

In America, the situation is the same. In the developing world, cash is even more essential since in 2017 there were still 1.7 billion people on Earth who were bankless:

It is hard to imagine that all these people will be able to break free of cash shortly.

#3: The underground economy and privacy

Whether we like to admit it or not, cash is still widely used in the underground economy. Many merchants prefer cash to keep certain revenue streams off their books.

Others prefer cash to preserve their privacy for certain payments. I'm thinking of what is sometimes called the “vice economy,” such as prostitution, drugs, or gambling. The informal economy represents between 10 and 15% of GDP in many Western countries.

Eliminating cash would mean depriving ourselves of a significant financial windfall. You can be sure that this will not be done.

#4: Cash remains a great plan B in the event of a cyberattack on electronic payment systems

Bankers are reluctant to talk about it in public, but privately they do not rule out the risk of a large-scale cyber attack on electronic payment systems. In the extreme scenario where card payments are interrupted for an extended period, it will be necessary to implement an offline system that the public is familiar with and that is generally accepted.

The most obvious fallback option is the old-fashioned analog alternative: physical coins and bills. Various digital variants of offline payments are in the works, but it will be years before that happens. Perhaps a digital euro will play a role in this. One theoretical possibility is that this digital euro can be transferred from one smartphone to another, without both having to be online.

Bitcoin will also have a key role to play here, but that's another topic you can get more information on here:

All of this leads me to believe that cash will still be around for the next 10-20 years (at least). Feel free to give me your thoughts on this issue.