One of the report, Congress Research Service report “Long Live Cash: The Potential Decline of Cash Usage and Related Implications” released on May 10, 2019, examines the decline of cash usage in the United States and contemplates on the rise of cryptocurrency and other digital assets – not cash – as alternative payment systems.
According to the report, the use of cash has been dropping despite the increase of currency circulation, the migration from cash payments to alternative payments is evident in our day to day lives where we use credit cards and debit cards and electronic wallets at retails stores.
With the adoption of digital currencies as an alternative channel of payment thanks to its cost-effective processing fees and efficient processes, businesses and policymakers are looking at the effects and role this new mode of payments will affect the retail payment systems.
Despite the demand of cryptocurrencies in the United Stets, they are not commonly used as a mode of payments, but rather digital assets holders use them as an investment vehicle. This is because businesses and investors are reluctant to use cryptocurrencies because they have a limited understanding of how the technology behind cryptocurrencies work. With the current use of modern payment systems of electronic payments, the community are satisfied with the speed and convenience offered by them and are not looking for other moderns of unfamiliar payments systems such as cryptocurrencies.
Despite the low usage, some believe cryptocurrency and blockchain will be integrated as one of the payment options in the future.
According to Amy Zirkle, interim CEO of the Electronic Transactions Association, a Washington-based trade group for the payments technology industry – Blockchain and Cryptocurrency innovative approach to solve problems in the current payment industry such as cross border payments, securing financial data and communication between financial institutions, will be the value that should not be ignored.
Cryptocurrency high volatility is a feature that undermines the ability of its acceptability as forms of money. According to the Congress report, the use of cryptocurrencies as a mode of payments will require frequent repricing of products causing confusion among buyers and sellers.
The CRS report also questions the ability of cryptocurrencies to handle the sheer volume in order to be used as cash replacements, the current cryptocurrency systems have scalable problems and are not capable of processing the high number of payments transactions as a replacement to cash.
Federal Reserve and Financial institutions are currently working on solutions that blockchain technology is claiming to solve, such as payment speeds in order to improve payment processing speeds, according to the CRS report.
Despite the uncertain future of cryptocurrencies, blockchain technology, and distributed ledger technology, has potential to solve current cash and traditional systems of payments, its own challenges such as scalability affect its adoption as an alternative electronic payment that is used on our day to day lives.
