A recent study from the International Monetary Fund (IMF) shows that cash and various deposits in banks will be replaced by the presence of electronic money and digital money (cryptocurrency) in the future.

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The results of the research conducted by Tobias Adrian and Tommaso Mancini-Griffoli are summarized in the document The Fintech Not titled The Rise of Digital Money and published last Monday.

Its contents, shows how tight the competition of technology companies with banks and credit card companies.

Quoted from Coindesk on Wednesday (7/17/2019), the author mentioned the format of digital money was increasingly in demand by consumers and policy makers.

"Conventional money competes with electronic money, where cash can be stored in digital money with a adjusted exchange rate," the statement said.

In order to maintain existence, banks are advised to innovate and offer advantages that electronic money and digital money do not have.

Still Questionable Stability

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Even so, the format of electronic money is still questionable about its stability. "It's easier for transactions, but if the customer saves 10 euros, he also has to get 10 euros in the future," the researcher wrote.

In addition, this paper also discusses i-money which allows the exchange of digital money with paper money.

The researcher immediately focused on the crypto currency made by Facebook, Libra, which has the potential to become new i-money because the Libra currency can be exchanged for government currency.

"Libra coins can be exchanged into paper currency at any time from the ongoing value of the underlying portfolio, without any price guarantee," he continued.

Need the Role of the Central Bank

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Here, the role of the central bank as a controller for the formation of future electronic money is needed so that business competition in the field remains healthy.

"One solution is to offer access to newly selected electronic money providers to the central bank reserves, even in tight conditions. Doing so creates risks, but also has various benefits.

Equally important, central banks in several countries can partner with electronic money providers to effectively provide digital central bank digital currencies (CBDC) or digital versions of cash, "advises the researcher.

This paper also proposes a different solution, namely synthetic CBDC (sCBDC), in which the central bank will offer settlement services to electronic money providers, including access to central bank reserves. However, all other functions will be the responsibility of private electronic money providers based on regulations.

sCBDC will be a cheaper and slightly risky model. With this concept, the private sector is still possible to innovate and interact with customers, while the central bank provides a sense of trust and efficiency to customers simultaneously.