IMF Working Papers Volume 2025 Issue 056: Could Digital Currencies Lead to the Disappearance of Cash from the Market? (2025)

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

Author:

Marco Pani

Marco Pani
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https://orcid.org/0000-0003-1148-9799

and

Rodolfo Maino

Rodolfo Maino
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https://orcid.org/0000-0002-6853-3677

Series:: IMF Working Papers

Volume/Issue:: Volume 2025: Issue 056

Language:: English

Publication Date:: 21 Mar 2025

DOI:: https://doi.org/10.5089/9798229004725.001

ISBN:: 9798229004725

ISSN:: 1018-5941

Pages:: 39

Keywords:: Payment systems; two-sided markets; digitalization; digital currencies; technological innovation; payment innovation; disappearance of cash from the market; market model; insights from a merchant-customer; cash extinction; Currencies; Currency reform; Consumer credit

Legal-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.

Series:: IMF Working Papers

Volume/Issue:: Volume 2025: Issue 056

Language:: English

Publication Date:: 21 Mar 2025

DOI:: https://doi.org/10.5089/9798229004725.001

ISBN:: 9798229004725

ISSN:: 1018-5941

Pages:: 39

Keywords:: Payment systems; two-sided markets; digitalization; digital currencies; technological innovation; payment innovation; disappearance of cash from the market; market model; insights from a merchant-customer; cash extinction; Currencies; Currency reform; Consumer credit

Legal-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.

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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.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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