Will banks survive the transition to a new monetary system?
Eagle-eyed beachcombers may recognise the round white shells etched with a five-petal flower. These erstwhile homes of sea urchins resemble a silver dollar, earning them the nickname “sand dollars” and the myth that they are the money of mermaids or the long-lost city of Atlantis. They pile up on the shores of the 700 islands in the Bahamas, so its central bank picked the sand dollar as its logo. In October 2020, when the Bahamas launched the world’s first central-bank digital currency (cbdc), the authorities chose to adorn the app with the familiar floral pattern and call it the sand dollar.
cbdcs are a digital version of cash—the physical money issued by central banks. In most countries, their design will resemble existing online platforms, but with a difference: money held as a cbdc is equivalent to a deposit with the central bank. In China more than 100,000 people have downloaded a similar trial mobile-phone app, enabling them to spend small government handouts of digital cash, or “e-yuan”. The app, like the paper yuan, depicts Mao Zedong. European officials want to launch a digital euro by 2025. On April 19th the Bank of England and the British Treasury launched a taskforce to consider the idea. In America the Fed is also looking into it. A survey by the Bank for International Settlements finds a large majority of central banks researching or experimenting with cbdcs. They may be in use by countries with a fifth of the world’s population in as little as three years’ time.
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