Question

What are the implications of eliminating currency from the economy, that is, of having a “cashless economy?”

Answer 1

Cashless Economy is one which every country is striving for, but as the saying goes that every coin has 2 sides, this also has both pros and cons:

Below are the benefits of having a cashless economy:

1. Drives Investment- If the economy is cashless people are forced to invest their money in financial investments, this boosts the economy and eventually leads to economic growth. If money is withdrawn its removed from circulation and rendered useless.

2. Reduction of costs- Holding money in physical form has various costs associated to it, such as cost of printing, minting, redesigning the currency, Cost of maintaining the currency. By going paperless all these expenses are reduced.

3. Reduction of illegal activities- Going paperless reduces the illegal activities on a large scale as every action is tracked. Elimination of cash also reduces street crimes such as robbery of cash.

Below are the cons of eliminating cash:

1. Lack of knowledge- Lack of adequate knowledge to use the digital platforms may be a concern to many. As not many people are aware of the modes of using the digital payment method.

2. System Issues- If the digital mode of transferring money goes down, there will be a lot of concerns and issues, specially in difficult situations, thus paper currency during these times will be of great help.

3. Hacking- Movement of money virtually also would give rise to many hackers who would hack systems and use the money for illegal activities like terrorism etc, Thus money is not safe while digital.

4. Lack of Privacy- Since all the money would be tracked, individuals do not have any privacy to the money they have invested. By going digital e forego our right to private transactions.

Cash is an important part of an economy and cannot be ignored. Going digital is essential for the economy however there should also be a facility of holding cash, probably with a limit on how much each individual can hold. This would be of great help in difficult times.