What Will Be the Impact of Fintech on the Payment System? A Perspective from Money Creation

Hajime Tomura

No 2204, Working Papers from Waseda University, Faculty of Political Science and Economics

Abstract: The efficiency of thecurrentpayment systemrestsnot only onengineering technology but also on the legal tender and central bank system enacted by each country’s law.This essay compares the current paymentsystem with an alternative payment system that uses electronic records,such as cryptocurrencies and security tokens,assubstitutesfor conventionalcurrencies. The alternative payment system has an advantage in designing the integration of electronic payments into non-bank businesses from scratch without being bound by the technical specifications of existing bank deposit account systems. On the other hand, it cannot benefit from the supply of legal tender issued bythe central bank. Given this disadvantage, this essay argues that electronic records such as cryptocurrencies and security tokens will not substitute conventional currencies aspontaneously. Rather than changing the internal structure of the banking system, fintech will facilitate connections between bank deposit account systems and non-banking systems. Given this outlook, this essay predicts that central-bank digital currency (CBDC) will be a kind of enabler service if implemented in acountry with a developed banking system.

Keywords: paymentsystems; security tokens; cryptocurrencies; electronic money; legal tender; central-bank digital currency. (search for similar items in EconPapers)
Pages: 17 pages
Date: 2022-10
New Economics Papers: this item is included in nep-cba, nep-mon, nep-pay and nep-reg
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Working Paper: What Will Be the Impact of Fintech on the Payment System? A Perspective from Money Creation (2022)
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