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A Farewell to Cash

While proponents of central bank digital currencies argue that the technology would boost financial inclusion and efficiency, critics warn that it poses financial, political, and environmental risks. But these concerns are overblown, especially when also weighed against CBDCs’ potential to strengthen monetary policy.

NEW YORK – The European Central Bank and the US Federal Reserve have each said that they do not intend to abolish physical cash if and when a central bank digital currency (CBDC) is introduced. Recent policy briefs by the ECB and the Bretton Woods Committee argue against paying interest (positive or negative) on CBDCs. Policymakers should reconsider both stances. There are good reasons not only to support the early introduction of CBDCs, but also to pay interest on them and abolish cash.