## Going Cashless

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**Canonical URL:** [Going Cashless](https://www.imf.org/-/media/files/publications/fandd/article/2018/june/point.pdf)

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### Decline of cash in Sweden
- Demand for cash has dropped by more than 50 percent over the past decade.
- More than half of all bank branches no longer handle cash.
- Seven out of ten consumers say they can manage without cash.
- Half of all merchants expect to stop accepting cash by 2025.
- Cash now accounts for just 13 percent of payments in stores (Riksbank 2018).
- New retail payment methods include debit cards and the mobile phone application Swish, which enables real-time payments between individuals.
- Similar mobile-payment adoption is noted in India, Pakistan, Kenya, and Tanzania.

### Implications for central banks and payments infrastructure
- Central banks traditionally manage the money supply and issue state-guaranteed means of payment; widespread digital payment adoption raises questions about that role.
- Concentration example: clearing and transfers between accounts in Sweden are concentrated in one system, Bankgirot.
- Characteristics of payments markets:
  - Low marginal costs once infrastructure is in place.
  - Positive externalities: the value of being connected increases as more users join (analogy to the telephone).
  - Payments can be regarded as collective utilities.
- Citizens’ expectations for payments markets:
  - Broad availability of services.
  - Safe and secure infrastructure.
  - Assurance that payment orders will be carried out.
  - Efficiency: fast settlement, lowest possible cost, simple and easy to use.
- The author expresses increasing uncertainty about whether these requirements can be unequivocally fulfilled as cash declines.

### Legal tender, access, and social concerns
- If banknotes and coins decline, the general public may lose access to a state-guaranteed means of payment; private sector actors would increasingly control accessibility, technological development, and pricing.
- Potential consequences highlighted:
  - Further limitation of financial access for groups that currently rely solely on cash.
  - Reduced competition and redundancy in payments infrastructure if the state withdraws.
- Question posed: In a cashless society, what would legal tender mean?
- The author believes cash’s decline cannot be stopped or reversed, noting demographic trends (young people using practically no cash in Sweden) and rapid changes in other markets (example: China).

### Crypto assets and digitalization
- Crypto assets are not considered money by the author because they do not fulfill the three essential functions of money—to serve as a means of payment, a unit of account, and a store of value.
- Crypto assets’ main contribution: demonstrate that financial infrastructure can be built in new ways (blockchain technology, smart contracts, crypto solutions).
- Policy-related observations:
  - Central banks should clearly communicate that cryptocurrencies are generally not currencies but rather assets and high-risk investments to help prevent unnecessary bubbles.
  - There may be a need to review regulatory frameworks and supervision for crypto assets.

### Policy considerations and recommendations
- The state has a role to fill in the payments market: to regulate or provide infrastructure ensuring smooth functioning and robustness.
- The state cannot entirely withdraw from its social responsibility in areas of retail payment infrastructure and ensuring access to a state-guaranteed means of payment.
- Central banks should consider, as a practical matter, whether to issue digital currency to the public; this is a complex issue that central banks will likely struggle with for years.
- The author is convinced that within 10 years we will almost exclusively be paying digitally in Sweden and in many parts of the world.

*Stefan Ingves, governor of Sveriges Riksbank*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2018/june/point.pdf_