The digitalization of money and the major transformations it brings

What would be the purpose of a digital currency, such as the euro? How would it work? Our society is ready to adopt a digital currency, or not? The activity of banks will be dramatically changed, or not? What about the privacy of what money can buy? Who will rule this new digital reality? Indeed, these questions arise since the European Central Bank (ECB) has decided to launch a two-year investigation phase of a possible digital euro (since July 14, 2021).

   The digitalization of money itself is a huge and unprecedented project. Based on virtual units, such as a token, people will use a digital wallet for their transactions. However, they will not be able to use traditional money (physical tokens, banknotes) anymore, but only this new form of digital cash.

   A token is an instrument representing value that can be exchanged directly, on a peer-to-peer basis, without validation by a third party. Holding a token means that you will have its value in your disposal and ready to use it. For instance, experts created the form of cryptocurrencies (cryptos function on a blockchain), but there are already over 9,000 such currencies because everyone wants to exploit the transition and become “rich” in this bubbled world.

   Digital money can be stored online, which means it can be stored on a mobile device or a computer, it can be instantly transferred through a variety of apps, and it can be also used directly to pay from person to person (peer-to-peer). Digital tokens are fungible, divisible, transferable, and they can be customized to any specific need.

   The question that arises in terms of this future is about how we can protect the amount of value digitally created, as well as the privacy of transactions. Therefore, ECB is developing a digital euro to preserve the role of public money in a digital economy. It is worth noting that ECB is the world leader fighting against money laundering, the financing of terrorism, and tax evasion.