The paper “ Digital Cash - Why the Central Banks Should Start Issuing Electronic Money by Dyson and Hodgson” is an outstanding example of the article on finance & accounting. Dyson and Hodgson highlight reasons why central banks should start issuing electronic money. The authors also accentuate ways to implement digital cash besides exploring the issues and challenges that central banks may face in their endeavor to issue digital cash. According to the authors, the death of cash along with the increase of digital currencies with an example of Bitcoin has triggered the need for the issuance of digital cash by central banks.
The authors describe digital cash as an electronic version of coins and notes. Although there is a need for digital cash, given the death of cash and the increase of digital currencies, implementing digital cash comes with challenges. One of these challenges includes how central banks would get the novel digital cash into the economy as well as how the public would utilize digital cash. While certain central banks such as the Bank of England have already assessed the potential of issuing digital cash, Dyson and Hodgson (2016) report that issuance of digital cash comes with both positive and negative impacts.
The authors maintain that the issuance of digital cash holds a great number of benefits. Issuing digital cash is beneficial in the sense that it broadens the different options for monetary policy. According to Dyson and Hodgson (2016), central banks might want to issue digital cash because physical cash forms a barrier to the use of negative interest rates. Therefore, the issuance of digital cash would allow the usual monetary policy to function at negative interest rates.
When a firm is slowing and almost going into recession, the conventional monetary policy reacts to lowers the base rate. The reduction in the rates of interest lowers the cost to firms. I find these sentiments credible because the authors make use of credible sources and real examples. However, the authors must understand that lowering the interest to Zero Lower Bound instigates charges to the banks whereby the central banks charge banks to hold reserves. This can make banks to translate their reserves into cash to evade the charges and to do so calls for extra investment in secure storage capacity.
Dyson, B & Hodgson, G 2016, ‘ Digital cash: Why the central banks should start issuing electronic money’, Positive Money, pp.1-36.
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