Money typically has three functions: it is a unit of account, providing a value to every good and service; it is a medium of exchange that allows us to buy and sell that good or service; it is a store of value, because it allows to keep its value over time. Since coins no longer have an intrinsic value, they are pure conventions called to perform the three functions. The shape of money has changed in history and the evolution continues in a logic in which the goal is for good money to prevail. Today the virtualization of money is proceeding at a rapid pace, so much so that we are certain that the money of tomorrow will be very different from what we have known it so far.
Charging of cards, apps and wallets
The epidemic emergency has pushed the use of electronic money and various digital tools, in the form of cards, apps or wallets, decisive results for turning the economy into lockdown. Cryptocurrencies, digital currencies based on distributed ledgers that eliminate all intermediation, managed by algorithms and not by central banks, make many turn up their noses. But they have put their finger in the blight of a financial system that has large areas of inefficiency and exclusion.
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The moves of the central banks
So much so that one of the effects of the spread of cryptocurrencies is the acceleration of the projects of the so-called central bank digital currencies, which bring transparency, security, inclusion and efficiency: China is already riding them, Europe and the United States are trying to keep up. There is no doubt that the trend is towards the efficiency of digital, which not only eliminates the hidden costs of cash, but also brings out the “hidden” and enables a “hybrid” financial system capable of extracting value from data connected to transactions. Not that virtual currency eliminates any problem, on the contrary it uncovers other vulnerabilities. Starting once again with safety. But the benefits are vastly greater. We have accomplished this in the last year.
The cash paradox
This is why we must speak of a true “paradox” of cash by reading the data of the Bank of Italy which sees the continuous decline in the use of banknotes in transactions, increasingly digitized, accompanied by an increase in the demand for banknotes. As a medium of exchange and as a unit of account, cash has largely been replaced, as a store of value not yet. The tendency to hide money under the mattress just seemed like a reminiscence of the past. But there are no alternatives. The phenomenon can signal a recovery of the underground economy and then it is a question of putting in place all the necessary measures to counter the scourge. Or fear has prevailed and people feel safer with bills in their pockets in the face of an uncertain future. Nobody can prevent you from using cash as a safe haven of last resort. The important thing is to be well aware that there are much safer and more efficient ways to store value.