Could Digital Currencies Lead to the Disappearance of Cash from the Market?

Marco Pani and Rodolfo Maino

No 2025/056, IMF Working Papers from International Monetary Fund

Abstract: Private and public agents’ plans and actions to introduce digital currencies and other innovative payment instruments could produce some unintended consequences, including the potential disappearance of physical cash. This study employs a two-sided market model to examine how payment systems might respond to new currencies. Numerical simulations indicate that the success of a new currency hinges on a large-scale launch. However, even unsuccessful attempts could disrupt existing systems, potentially resulting in the elimination of cash. If cash plays a critical role as a safeguard, regulatory and monetary authorities should give due consideration to ensure its continued availability when payment innovations are introduced.

Keywords: Payment systems; two-sided markets; digitalization; digital currencies; technological innovation (search for similar items in EconPapers)
Pages: 39
Date: 2025-03-21
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