Sheila Warren: The world is embracing digital currency, and the US is falling behind
For many people all over the world, paper cash and metal coins are already items of memory. Mobile payment providers, like Apply Pay and Samsung Pay, are being used at cash registers in countries like the United Kingdom and Japan, and people have responded well to the ease of this system and some of the benefits it provides.
But some countries, like the United States, are already falling behind in this race to adopt digital currency.
As the technology developed and as support for e-commerce grew, many Chinese cities skipped right over credit card machines in favor of digital payments via WeChat and similar providers. The infrastructure, systems and processes to handle digital payments were relatively easy to adapt, and both industry and the government readily embraced the new digital reality. Because of this kind of support, the ecosystem was able to leapfrog over less advanced technologies and move directly to more advanced ones.
In environments like this where mobile payment is already de rigueur, there’s little psychological barrier to the widespread adoption of digital currency. If people do not think of paper cash or checks as meaningful alternatives, let alone a default, they are likely to be more open to a digital currency and possibly even to cryptocurrency. They are already used to the speed and ease of digital payments, and because they have been using e-money in some form or another for years, the leap from payments via WeChat, for instance, to bitcoin would be smaller than the leap from cash straight to bitcoin.
The reduction in hurdles to adoption means that these societies are poised to reap its broader benefits, including potentially an adaptation to cryptocurrency, should such adaptation prove useful.
Some countries are already starting to see the benefits, like Zimbabwe and Venezuela, where digital currency in some form or another is here to stay, and those systems that accommodate its existence are going to come out ahead of those that don’t. That’s because e-payments can lower the cost of doing business; electronic records can make transactions more transparent, leading to less black-market activity and more tax dollars; and blockchain and distributed ledger technology can help to ensure that information has been validated and not altered by nefarious parties.
Just as legal and other systems had to contend with stock, they’re being forced to contend with cryptocurrency and assess whether policies and processes put in place in a different era still apply.
With changes in technology, and especially with monetary policy, accompanying this new digital reality are regulatory responses that acknowledge the new state of affairs. Some countries, including Morocco and Bolivia, have reacted defensively, choosing to ban bitcoin or push out exchanges. Others, like Switzerland, have served as havens for this new approach to money, allowing for sanctioned experimentation via regulatory sandboxes, or even embracing experimentation with cryptocurrency altogether.
Regardless of how a country reacts, technology does not understand boundaries.
Technology will keep progressing in the countries and economies that want to take advantage of the speed or the agility that the digital world offers.
The rate of acceleration of adoption is likely to continue to increase, meaning that those economies that don’t start encouraging the creation of a robust digital payment infrastructure, complete with the necessary investments in infrastructure and accompanying regulation, are going to find it increasingly challenging to catch up.