Why Do Cash and Coins Matter in a Digital World?

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Can coins and cash exist in the future? The debate about the role physical money plays in a world rapidly shifting toward cryptocurrency has significantly ebbed and flowed in recent years. At the height of the COVID-19 pandemic in early 2020, many speculated the digital dollar was the future of currency.

A 2021 op-ed in The New York Times advocated the rise of the digital dollar. The plan, essentially, is central banks would introduce digital currencies in limited circulation. They would coexist alongside cash as another monetary option for the public. Over time, digital currency would become more popular than cash. Its circulation would expand. Gradually, dollars and coins would fade away.

To date, however, the U.S. Federal Reserve has not developed a digital dollar. While the op-ed notes the benefits digital currencies can bring to low-income households — including access to digital payment systems and basic banking services and the Fed’s opportunity to impose a negative interest rate — it hasn’t happened yet. 

The end of cash, the op-ed suggests, would have far-reaching effects on the economy, finance and society. But a world without any cash or coins would also equally impact the economy, finance and society as we know it. Do not feel propelled to sprint at full force toward digital currency, because there is still great value in physical currency.

Cash Is Reliable

The end of physical money has been predicted for nearly 60 years, according to the BBC. However, its existence has been with us for thousands of years, compared to the relatively recent advent of credit cards and contactless payments. 

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One of the reasons why we continue to hear slang like “cash is king” is because of its reliability. Cash and coins are the only forms of money where a third party does not need to be involved. Unlike the digital dollar, which would be useless in the event of a power or internet outage, you would not need to worry about paying for what you need while out running errands. 

Let’s use the example of shopping for groceries at the store. The payment machines go down rendering it impossible to pay for groceries unless you have cash. You can count on the reliability of physical money as an accepted form of payment.

Another example is forgetting your credit or debit card while you’re out shopping. If you have enough physical cash on hand, you can still pay for your purchase.

Cash Is a Store of Value

Part of proper financial planning means setting aside money in an emergency fund. Typically, this kind of money is kept in a high-yield account and is liquid in nature. 

Cash and coins act as a store of value. Two-thirds of cash holdings in American dollars exist outside of the United States, according to the BBC. You can take the money and build an emergency fund with it. You can use physical cash as a gift for small purchases. Physical cash and coins are also a key contribution to financial literacy. Many households teach their children how to appropriately learn about and use money with dollars and cents illustrating these lessons.

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There’s Privacy, and Security, in Cash

One of the many reasons cash and coins remain popular is because they are private. You can even be anonymous in using cash for financial transactions. 

What about security? Yes, it’s true cash can be stolen or lost. But the theft would not mean your identity would be at risk. You might be set back a bit financially, but you would not be at risk of losing valuable information that could later be connected to fraud in the wrong hands.

For all the confidentiality protections that exist with digital currencies, electronic hacking poses a significant risk of financial and identity theft. Adopting the digital dollar over cash would mean sacrificing one’s privacy and personal identity. It is a decision society would not easily be able to reverse once the adoption is complete.

Cash Is Still Inclusive

The digital dollar has the opportunity to benefit low income households in a multitude of ways. However, what is often less-discussed is the overall inclusivity that already exists through cash and coins. Low-income groups and the elderly can still certainly benefit from physical money, especially those in areas where there is limited or no access to digital currency.

We Have Deep Feelings About Physical Money

If society was in a position where it needed to give up dollars and coins, there is a likelihood we might not be able to fully part with money — ever.

The BBC article reflects upon our psychological relationship with physical money. There are so many emotions tied to finance, most of which are quite different with cash than digital currency. Touching money, for example, makes us feel as though it is ours. The more we touch a certain piece of currency, regardless of how much it’s worth, the more we feel we own it. 

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And, in times where life feels chaotic or unsettled, we are much more likely to feel a certain sense of safety and security in keeping physical money on hand. It’s a feeling unmatched by digital currency and extending beyond personal attachment. We trust physical cash and coins. Their physical presence leads to feelings of assurance in knowing money will always be there for us.

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