A new report from Moody’s Investor Service shows that cashless currencies and transactions are likely to remain prominent and grow in the coming decade.
- 80% of U.S. transactions in 2021 were cashless, as well as 41% in the EU, and more than 90% in China, marking a significant rise in cashless transactions in the aftermath of the pandemic, Axios reports.
- Moody’s does not believe that decentralized cryptocurrencies are going to see mass adoption in the next decade, as the volatility of unbacked currencies worries investors and consumers.
- It does note that the 60% year-to-date growth of crypto signals that these currencies will play a role in digital finance going forward, even without mass adoption.
- Central Bank Digital Currencies (CBDC) are likely to see some adoption in the coming years but face uphill battles with financial implementation, political backlash, competition with existing currencies.
Why It’s Important
While existing Federal Reserve policy has drawn scrutiny and criticism toward centralized banking, the American people do not appear to be interested in the mass adoption of an alternative form of currency. The U.S. dollar and other national fiat currencies remain the most prevalent and transacted currencies in common use, even 15 years after cryptocurrency was created.
As we previously reported, digital currencies are becoming increasingly demanded by consumers as more of the population’s financial needs are rooted in technology in everyday interactions. Financial services like Venmo and Apple Wallets have made the need for on-hand cash unnecessary, and many retailers no longer accept cash transactions.
The “cashless society” appears to be an inevitable change instigated by the government and consumer needs as the economy becomes more focused on convenience and transparency, in addition to the need to compete with foreign digital currencies.
However, Axios notes that CBDCs may see an uphill battle in acceptance. Virtual currency in the U.S. is currently backed by the U.S. dollar, with banks and financial institutions holding dollars on hand for liquidity. Even as CBDCs roll out, the major victim could be banks, who depend on liquidity for offering loans and services. Analysts are noting that a rollout could negatively impact major banks, still reeling from three historic collapses.