IMF Working Papers

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

By Marco Pani, Rodolfo Maino

March 21, 2025

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Format: Chicago

Marco Pani, and Rodolfo Maino. "Could Digital Currencies Lead to the Disappearance of Cash from the Market?", IMF Working Papers 2025, 056 (2025), accessed July 17, 2025, https://doi.org/10.5089/9798229004725.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Consumer credit, Currencies, Currency reform, Digital currencies, Financial markets, Money, Payment systems, Technology

Keywords: Cash extinction, Consumer credit, Currencies, Currency reform, Digital currencies, Digitalization, Disappearance of cash from the market, Insights from a merchant-customer, Market model, Payment innovation, Payment systems, Technological innovation, Two-sided markets

Publication Details

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