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Is a Cashless Society Problematic?

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  • Walter Engert
  • Ben Fung
  • Scott Hendry

Abstract

The use of bank notes in Canada for payments has declined consistently for some time, and similar trends are evident in other countries. This has led some observers to predict a cashless society in the future. This paper considers the implications of the abandonment of the use of cash in the future. More specifically, we look at a variety of ways in which the emergence of a cashless society could affect key concerns of a central bank, including seigniorage, monetary policy, payments and financial stability considerations. We find that a cashless society would not generally cause material, system-wide problems. There are a few areas, however, where concerns could emerge: the maintenance of both operational reliability and contestability in retail payments, and the provision of a safe store of value in an (extreme) financial crisis. We note policy options to address these potential concerns.

Suggested Citation

  • Walter Engert & Ben Fung & Scott Hendry, 2018. "Is a Cashless Society Problematic?," Discussion Papers 18-12, Bank of Canada.
    • Handle: RePEc:bca:bocadp:18-12
    DOI: 10.34989/sdp-2018-12
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    References listed on IDEAS

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    1. repec:bla:intfin:v:3:y:2000:i:2:p:211-27 is not listed on IDEAS
    2. Henry, Christopher S. & Huynh, Kim P. & Nicholls, Gradon, 2018. "Bitcoin awareness and usage in Canada," Journal of Digital Banking, Henry Stewart Publications, vol. 2(4), pages 311-337, May.
    3. Ben Fung & Miguel Molico & Gerald Stuber, 2014. "Electronic Money and Payments: Recent Developments and Issues," Discussion Papers 14-2, Bank of Canada.
    4. Garratt, Rodney & Wallace, Neil, 2016. "Bitcoin 1, Bitcoin 2, ... : An experiment in privately issued outside monies," University of California at Santa Barbara, Economics Working Paper Series qt91c7x1js, Department of Economics, UC Santa Barbara.
    5. Walter Engert & Ben Fung, 2017. "Central Bank Digital Currency: Motivations and Implications," Discussion Papers 17-16, Bank of Canada.
    6. Freedman, 2000. "Monetary Policy Implementation: Past, Present and Future – Will Electronic Money Lead to the Eventual Demise of Central Banking?," International Finance, Wiley Blackwell, vol. 3(2), pages 211-227, July.
    7. Christopher Henry & Kim Huynh & Rallye Shen, 2015. "2013 Methods-of-Payment Survey Results," Discussion Papers 15-4, Bank of Canada.
    8. Ben Fung & Kim Huynh & Anneke Kosse, 2017. "Acceptance and Use of Payments at the Point of Sale in Canada," Bank of Canada Review, Bank of Canada, vol. 2017(Autumn), pages 14-26.
    9. Rodney Garratt & Neil Wallace, 2018. "Bitcoin 1, Bitcoin 2, ....: An Experiment In Privately Issued Outside Monies," Economic Inquiry, Western Economic Association International, vol. 56(3), pages 1887-1897, July.
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    Cited by:

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    2. Agur, Itai & Ari, Anil & Dell’Ariccia, Giovanni, 2022. "Designing central bank digital currencies," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 62-79.
    3. Tercero-Lucas, David, 2023. "Central bank digital currencies and financial stability in a modern monetary system," Journal of Financial Stability, Elsevier, vol. 69(C).
    4. Iris, F. & Nawi, N. M. & Man, N. & Ramli, N. N. & Uddin, M. T, 2022. "Trust and Communication Influence on Farm Performance for Paddy Farmers: A Study in Bangladesh," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society (AESS), vol. 12(02), January.
    5. Katrin Assenmacher & Signe Krogstrup, 2021. "Monetary Policy with Negative Interest Rates: De-linking Cash from Digital Money," International Journal of Central Banking, International Journal of Central Banking, vol. 17(1), pages 67-106, March.
    6. Sergio Luis Náñez Alonso & Miguel Ángel Echarte Fernández & David Sanz Bas & Jarosław Kaczmarek, 2020. "Reasons Fostering or Discouraging the Implementation of Central Bank-Backed Digital Currency: A Review," Economies, MDPI, vol. 8(2), pages 1-27, May.

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    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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