Question

Why might a central bank switch from fiat money to digital money?

Why might a central bank switch from fiat money to digital money?

Homework Answers

Answer #1

There are many advantages of digital money:

-The Monetary Policy will have more options. Digital money will allow central banks to lower interest rates below zero to fight slower economy. It will also be easy to give money directly to individual houses, where it is needed the most. With money in hand the demand of goods will increase and economy will rise.

- The cost of printing money can be avoided totally. It will save trees and will help our planet to stay safe

- As all transactions will be digital, so armed bank robberies will no longer be a fear factor

- As individuals, institutions will settle directly in central bank money, so financial system will be safer

- Many new players who are not banks will come into play. The institutions providing Digital Cash account will be payment service provider and bank can concentrate on more important tasks like lending.

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