Like it or not, digital currency is coming. If the lesson of the universal Id taught us anything, it was that there is no stopping progress. I remember all the work that went towards trying to stop the universal ID back in the 1990’s. Strangely the universal ID started life with great support from VISA and other transactional institutions like it across the globe. Why? They saw the potential for digital currency which was for them an opportunity to capture a percentage of all financial transactions, including what were then commonly cash purchases. Privacy advocates put up a huge fight against linking social security numbers with driver’s licenses and financial and health records. They were able to hold off progress for a time, but the lure of knowing everything about someone is just too strong.
And now in most states we have special versions of the driver’s license which one presumably needs in order to fly. When a 16 year old goes into the DMV to apply for a driver’s permit, the pressure is on for the advanced, universal ID. We recently took our child in for a permit and had to actively decline the universal ID not once or twice, but more than half a dozen times throughout the short process of getting the permit. How does a universal ID relate to digital currency? That is the vehicle that you will likely use in the future to make all purchases. One card, or perhaps embedded chip, for everything. It is the utopian dream, chronicled in science fiction and progressive plans for over a century and it extends to all parts of your life.
Will it happen? Based on past performance, the likelihood is 100% unless the country breaks into active civil unrest. The only question is how long will it take to get there.
Back to the digital currency portion of the utopian dream. How soon will that become ubiquitous? When will the central bank be replaced by a worldwide mega digital currency control center that up till now was the stuff of Tom Krattman and Kurt Schlichter novels?
The answer is sooner than your thought. If you are a small or medium sized business and you want to continue to do business on the web, or in your town, you need to keep an eye on the progression of digital currency and be ready to make the jump. There are likely to be start-up costs associated with making the switch so it will be wise to build up a small reserve. The companies that can get out there and take digital currency as a form of payment first will be able to differentiate from their competition and gain a market advantage for a time. Market advantages are always fleeting but each one you can successfully pull off gets you a bonus of revenue and market share that will build over time.
If you look at historical growth of cryptocurrency in the US, which did not really start for all intents and purposes until 2014, you will see the growth of a niche product. After 5 years of growth, the market reached a whopping 2.6 million users. That trend can easily be forecast and we discover that it will take years to approach 90% of the population.
Why is the growth so slow? Because in a relatively free market, with few mandates, there has to be a compelling reason for people to shift a centuries-old way of conducting commerce. There needs to be some absolutely compelling reason for them to change. Just think of all the things that need to change, beyond simple paper money going away. Men won’t need all those pockets in their wallets. People won’t need checkbooks any longer. Purses will be designed differently. Cash registers will become a thing of the past, as will safes and money pouches. Whole categories of workers will be eliminated. You really cannot change a country’s financial system that swiftly without a government mandate.
Even with a government mandate, which appears to be on the horizon at this stage given all the trials and tests going on around the country, you can not change out all the infrastructure surrounding paper money commerce overnight, or ever in a year. There is just too much physical change that needs to happen.
Keep in mind, though, that the infrastructure is partly there already. Every one of us in the country just made sure that the IRS has our current banking information hooked up correctly so we could avail ourselves of those Trump-bucks. While that money was much-needed for many, it also was the carrot that caused us to tie the stick to our financial information. It isn’t like the government couldn’t get that information and catalog it in one spot, it would just take time and money and we all saved them the trouble by doing it for them.
Growth, under conditions of a government mandate, will still take a few years. Digital currency will take some time to become ubiquitous. For companies that already do business primarily online, now is the time to be paying attention and saving some capital so that you can quickly make the change when the opportunity is there and a government mandate is in place. For others, the change-over is more complex. You cannot just simply stop accepting cash until enough time has elapsed to allow for a large enough percentage of your target customer base to change their money habits.
Regardless, business owners need to be watching the news and looking for moves towards that all-important government mandate away from physical money and to digital currency. Get some proverbial cash stored away so you can spend what you need to get set up when the time comes and then go on about your business until then. And mark my words, then is coming.
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A trip down the rabbit hole a bit further to look at areas of resistant to adoption and a potential up-welling of black-market/off-market alternatives. . .
My thought is that there are some significant parts of the economy that cannot tolerate a continuously auditable and traceable electronic currency.
These would include illegal gambling, Drug trade, bribery, and basically anything embarrassing like someone’s porno preferences. Receipts for dinner with the mistress. Things like that.
How do you buy food on the black market if every transaction is recorded?
There is also the “Mark of the Beast” factor to consider.
The more interesting trend could be the alternatives. Precious metals. Gems. Bitcoin / Crypto-currency. Illegal economy on the dark web was one of the initial use cases for crypto. This is also more difficult to forecast given that it will probably adopt in a discontinuous fashion.
Second order effects: legal prohibition owning precious metals. Prohibition of strong encryption. Prohibition of TOR and similar.
The bottom line is a goverment-mandated switch to digital currency could kick off serious societal unrest.
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Further Reading & References:
https://fortune.com/2020/04/27/digital-currencies-move-from-talk-to-action/
https://think.ing.com/articles/how-will-covid19-impact-digital-currency-developments-going-forward/
https://www.technologyreview.com/2020/04/16/1000047/facebook-libra-fiat-stablecoins/
https://www.zdnet.com/article/peoples-bank-of-china-kicks-off-digital-currency-trials/
https://www.coindesk.com/private-companies-could-play-role-in-cbdc-issuance-bank-of-england-says