Physical vs Digital Currency. A Difference that Makes a Difference

Key Points

Digital currency enables better tracking of monetary flows compared to physical currency, enhancing efficiency.
The intrinsic difference lies in the ability of digital currency for advanced record-keeping by monetary authorities.
By leveraging technological advancements, monetary authorities can optimize monetary policies and operations.
Understanding these differences can help in adapting to future financial systems that increasingly rely on digital currency.

Abstract

This paper compares digital and physical currency, focusing on a single intrinsic difference: digital, unlike physical currency, allows the monetary au- thority to trace the monetary flows in and out of the accounts. We show that this technological advance in record-keeping can be used by the monetary au- thority to improve upon physical currency and achieve efficiency in a wide range of circumstances.

Physical vs Digital Currency. A Difference that Makes a Difference

Key Points

Abstract

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