It’s not necessary that paper money will vanish absolutely in the near future at any moment. Rather, it is clear that over the last few decades online transfers have become more and more prevalent and there is no reason why this pattern should not continue. We might also get to the point where purchases with paper money are extremely rare-for others. At that point, the tables could turn and what we now consider paper money can actually act as the backup to our electronic currency, the way paper money was backed once by the gold standard. Yet even that possibility is hard to imagine, partially because of how we’ve historically put a premium on paper currency.
WHAT IS THE FUTURE OF MONEY?
The idea behind money dates back to the beginning of civilization. It’s no surprise why money has been caught among civilized people: it was a much more efficient and convenient way to deal with business than with other goods and services. Can you take an image of keeping all your wealth in something like livestock? Yet unlike goods and services, money doesn’t possess in and of itself an intrinsic value. Money is in fact just a piece of specialized paper or numbers on a ledger today.
While it’s important to remember that this wasn’t always the case (money was minted in metal coins that held real value for most of history), today the mechanism relies on a collection of shared beliefs. That is, money has value because we, as a society, gave value to it. You may call money a good with a small supply and a demand in that sense simply because we want more of it. Simply put, we want money because we know other people want it, and we can exchange goods and services for money.
ENABLING TAX EVASION
Cash makes the ‘secret economy’ possible. It is not hard to see why, as it does not leave a paper trail for tax investigators to audit or monitor. For example, if an employer pays a worker under the table in cash, both the employer and the employee do not pay for the transaction employment benefits or income tax. It is not shocking to see why employees in occupations that are paid mainly in cash-such as waiting tables or private tutoring-appear to underreport their wages.
Person undervaluing of wages is the single largest contributor to the tax gap. Tax evasion costs the U.S. $200 billion annually, about 1 percent of the country’s GDP. On average, OECD countries lose around 2–3 percent of their overall tax revenues per year, whereas low-income countries appear to lose more: about 6–13 percent.
MONEY: PREDICTION FOR THE FUTURE
And if we’re already in the future where the value of money is simply the interest that’s been allocated to it, what has kept us from heading towards a fully digital currency? Because of our national governments, the response is large. We’ve seen digital or encrypted currencies such as Bitcoin rise (and fall) in. Some keep asking what we’re all doing with the dollar (or pound, euro, yen, etc.). Yet beyond the issues of value storage for such digital currencies, it’s hard to imagine a future where these currencies are replacing national currencies like the dollar. Indeed, as long as governments continue to levy a tax, they will have the authority to dictate the currency in which those taxes can be paid.
As for one international currency, we are unlikely to get there anytime soon, but we expect that as time goes on, the number of currencies will decrease as the world becomes more globalized. We can see this happening today as if a Canadian oil firm is negotiating a contract with a Saudi Arabia firm, and the agreement is being negotiated in US dollars or EU Euros, not Canadian dollars. The world could get to the point that only four or five different currencies are in use.
RISE OF DECENTRALIZED CURRENCY
Whether you love it or hate it, it is highly likely that government-backed digital currencies will begin to appear in both strong and poor economies, as the benefits would prove too enticing to be ignored by the governments.
It may seem like bad news for privacy-minded cypherpunks and anti-establishment folk, creating government-issued digital currencies may be just the trigger for decentralized cryptocurrencies to grow. The future of money, alongside digital currencies, could be a reality in which cryptocurrencies legitimately exist.
When solutions allow for smooth and inexpensive trading of digital currencies with cryptocurrencies, cryptocurrencies such as Bitcoin can be recognized and used as the native currency of the internet. This will then promote online practices such as e-commerce, remittance, and trading. We may also find ourselves tapping into a new source of enormous economic opportunity as it becomes possible to bring billions of unbanked people into the global gig economy. Where inclusiveness of this demographic has been challenging due to a lack of proper banking and credit infrastructure, it is now an everyday possibility to find remote employment with mobile wallets, cryptocurrencies, and digital currencies.
A digital currency would allow him to “require more access [to financial services], serve more people, and travel much faster around the world.” Talking to Joe Rogan on the latter’s podcast; he shared his excitement and expectation that Bitcoin would take on the role of global currency.
Fiscal revolution is unavoidable. Cryptocurrencies go nowhere. It seems at this very moment that governments and mobile app development companies are driving every person with a Smartphone towards a cashless future. So hold your wallet on to those bills. They might one day become a souvenir and history lesson for your kids.
What we’re more likely to see is the continued rise of online transactions that people are less willing to pay fees for. As growth in the hiring of mobile app developers has been seen with the rise of services like PayPal and Square. We will be searching for and inventing new, lower-cost ways to transact electronically with the money. What’s most fun about this trend is that while paper money is in many ways less effective, it’s still the cheapest way to transact: it’s free!