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What Will Be the Impact of Fintech on the Payment System? A Perspective from Money Creation

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  • Hajime Tomura

    (Waseda University)

Abstract

The efficiency of thecurrentpayment systemrestsnot only onengineering technology but also on the legal tender and central bank system enacted by each country’s law.This essay compares the current paymentsystem with an alternative payment system that uses electronic records,such as cryptocurrencies and security tokens,assubstitutesfor conventionalcurrencies. The alternative payment system has an advantage in designing the integration of electronic payments into non-bank businesses from scratch without being bound by the technical specifications of existing bank deposit account systems. On the other hand, it cannot benefit from the supply of legal tender issued bythe central bank. Given this disadvantage, this essay argues that electronic records such as cryptocurrencies and security tokens will not substitute conventional currencies aspontaneously. Rather than changing the internal structure of the banking system, fintech will facilitate connections between bank deposit account systems and non-banking systems. Given this outlook, this essay predicts that central-bank digital currency (CBDC) will be a kind of enabler service if implemented in acountry with a developed banking system.

Suggested Citation

  • Hajime Tomura, 2022. "What Will Be the Impact of Fintech on the Payment System? A Perspective from Money Creation," Working Papers 2204, Waseda University, Faculty of Political Science and Economics.
    • Handle: RePEc:wap:wpaper:2204
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    References listed on IDEAS

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    More about this item

    Keywords

    paymentsystems; security tokens; cryptocurrencies; electronic money; legal tender; central-bank digital currency.;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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