What is the difference between digital and crypto currencies

10.05.2023. / 15:56

BELGRADE – Digitization of paper money is a natural process of evolutionary character. Compared to traditional money, the digital currency of central banks will bring greater comfort and efficiency when making payments. It will reduce the cost of handling and storing the cache. It will significantly increase the degree of centralization of payment traffic, and the more centralized the system, the more efficient the procedures are, there is instant insight, there is no privacy and the control is strengthened.

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Centralized state money will be in a single database. Of course, digital currency will bring with it certain imperfections. Let’s say, you can be instantly banned, your funds taken away, monitored in spending money, forced to keep money in the bank at a negative interest rate because there is no more straw. Then, centralized government money in a single database is more vulnerable to hacking and can be hacked in the same way as Master, VISA were.

If we take Bitcoin, which stands as a coat of arms on the shield of crypto currencies, as a constant of decentralized, hypervolatile and legally undefined currencies, in contrast to it, the digital currency of the central bank will be, from the very beginning, money par exelance – legal means of payment in full capacity, usable for any transaction, with a predictable and stable value.

Paper money and official digital currencies will be created by central banks as part of the projected growth of the money supply through the channel of primary emission, mostly, as they have done so far. Existing and newly created stocks of crypto currencies already carry with them a mystical valence. They are not created by central banks, they do not enter into official monetary aggregates and money supply, they are also not part of the financial potential of commercial banks, nor are they part of credit arrangements between the economy and the banking sector.

Their share is very small in the total turnover, i.e. aggregate supply and demand and GDP of national economies, and the fact is that transactions in crypto currencies are mostly non-corporate. Crypto currencies have a lot of support in the techno-financial oligarchy, which would lose a good part of the market if their status were disrupted or disappeared, primarily for the sale of, conditionally speaking, high-tech equipment.

The digital currency will certainly bring more comfort in payments to the target audience and the economy, but also greater control. On the other hand, crypto currencies are seen as a way to stash away excess cash and try to make speculative profits.

Dr. Branko Živanović, MA Aleksandra Cvejić

Source: Belgrade Banking Academy

Source: Capital.ba – Informacija je capital by www.capital.ba.

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