Economics Dictionary of ArgumentsHome
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| Cash extinction: Cash extinction refers to a hypothetical future where physical banknotes and coins are no longer used for transactions, replaced entirely by digital payment methods like cards, mobile payments, and digital currencies. While still popular in some countries like Germany, the global trend shows a decline in cash usage, driven by convenience, e-commerce, and a desire to combat illicit financial activities. See also Cross-border transactions, Money laundry, Cashless society._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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IMF Working Papers on Cash Extinction - Dictionary of Arguments
IMF IV 7 Cash Extinction/IMF/Pani/Maino: The payment system landscape is rapidly changing, driven by technological innovations. Various privately issued crypto assets, such as Bitcoin or Ethereum, have already been launched in the market, with mixed success, and several jurisdictions are considering the introduction of central-bank-issued digital currencies (CBDC). >Cryptocurrencies, >Bitcoin, >Ethereum, >Blockchain, >Crypto Transactions, >Crypto and banking. Payment system: Could the introduction of digital currencies and other innovative payment instruments lead to the unintended consequence of physical cash disappearing from the payment system? This paper* addresses this question from the perspective of the dynamic evolution of the payment system. Cash: Cash has unique properties that make it an important safeguard during disruptions or failures in payment systems. Cash provides a high degree of anonymity, generally leaving no transaction records (exceptions include, in some jurisdictions, identification requirements for transactions above a certain threshold, and mandatory declarations for carrying amounts above some thresholds across borders), cannot be remotely controlled, unlike some digital currencies, and can be physically stored, enhancing its resilience to adverse events such as natural disasters. It plays a crucial role as an "outside option," ensuring the reliability and integrity of other payment methods. „Cashless society“: Concerns about a "cashless society" have been voiced by various observers. Some view it positively, such as Rogoff (2016)(1), while others, like Rochemont (2020)(2) and Beer et al. (2015)(3), warn of adverse consequences, particularly the loss of privacy. These concerns are heightened by the potential irreversibility of cash extinctionbecause reintroducing cash in a non-cash system would be challenging and costly. Pani/Maino: To safeguard the continued utilization of cash and to uphold the equilibrium of the payment system, the study* advocates for a proactive policy approach and for the implementation of measures aimed at ensuring the sustained relevance of physical currency, especially in scenarios where the introduction of new digital currencies might inadvertently lead to the extinction of traditional cash. IMF IV 8 Cash extinction/Economic theories/IMF/Pani/Maino: Various authors have documented the downward trend in the use of cash and inquired about its causes. Marszałek and Szarzec (2022)(4) have retraced this decline to a change in demand for cash and banking services and to a change in the payment habits of customers. Amromin and Chakravorti (2007)(5) have shown how demand for cash (proxied by demand for small-denomination currency) decreases with increased use of debit cards and greater retail market consolidation. Arango et al. (2015)(6) have highlighted how merchants’ acceptance of payment cards - more than the rewards offered by credit card companies - affects what instrument customers use to make payments. Looking at the recent experience with mobile money in Uganda, Simione and Muehlschlegel (2023)(7) found evidence that the use of mobile money is related to perceptions of the risks of carrying cash, to send or receive remittances, and to borrow and save. * Pani, Marco, and Rodolfo Maino. (2025). “Could Digital Currencies Lead to the Disappearance of Cash from the Market? Insights from a ’Merchant-Customer’ Model.” IMF Working Paper WP/25/56. 1. Rochemont, S., 2020, “A Cashless Society in 2019: The Cashless World in Motion Review,” January (London: Institute and Faculty of Actuaries). 2. Rogoff, K., 2016, The Curse of Cash: How Large-Denomination Bills Aid Crime and Tax Evasion and Constrain Monetary Policy, Economics Books, Princeton University Press. 3. Beer, B. U.W. Birchler, and E. Gnan, 2015, “Cash without Future? Future without Cash? A Wider View,” SUERF Policy Note 3, December. Bounie, D., A. François, and L. Van Hove, 2016, "Merchant Acceptance of Payment Cards: ’Must Take’ or ’Wanna Take’?" Review of Network Economics, Vol. 15(3), pp. 117–46. https://doi.org/10.1515/rne-2017-0011. 4. Marszałek, M., and K. Szarzec, 2022, “Digitalization and the Transition to a Cashless Society,” in Digitalization and Firm Performance, ed. by M. Ratajczak-Mrozek and P. Marszałek, pp. 251–81 (Palgrave Macmillan). 5. Amromin, G., and S. Chawrakorti, 2007, “Debit Card and Cash Usage: A Cross-Country Analysis,” Federal Reserve Bank of Chicago Working Paper 2007/4. 6. Arango, C., P.H. Kim, and L. Sabetti, 2015, “Consumer Payment Choice: Merchant Card Acceptance versus Pricing Incentives,” Journal of Banking & Finance, Vol. 55(June), pp.130–141. Armstrong, M., 2006, “Competition in Two-Sided Markets,” Rand Journal of Economics, Vol. 37(3), pp. 668–91. 7. Simione, F., and T. Muehlschlegel, 2023, “Mobile Money, Perception about Cash, and Financial Inclusion: Learning from Uganda’s Micro-Level Data,” IMF Working Paper 23/238 (Washington: International Monetary Fund)._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
IMF Working Papers IMF II IMF Working Paper André Reslow Gabriel Söderberg, Cross-Border Payments with Retail Central Bank Digital Currencies: Design and Policy Considerations IMF Fintech Note 2024/002 Washington, DC. 2024 IMF III IMF Working Papers Clemens Graf von Luckner Robin Koepke, Crypto as a Marketplace for Capital Flight. IMF Working Paper 24/133 Washington, DC. 2024 IMF IV IMF Working Papers Marco Pani Rodolfo Maino, “Could Digital Currencies Lead to the Disappearance of Cash from the Market? Insights from a ’Merchant-Customer’ Model.” IMF Working Paper WP/25/56 Washington, DC. 2025 |
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> Counter arguments against IMF Working Papers
> Counter arguments in relation to Cash Extinction
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