The Future of Money

A deep digitalization or a complete shift to the use of virtual currencies would have harmful effects on society, including: easier manipulation of digital money, closer monitoring of people’s behavior and the introduction of a dynamic pricing system in commerce based on purchase history made by each individual, are the conclusions of specialists in finance, technology, data protection and human rights, in one of the largest events about the future of money in Romania, organized in Bucharest by the Austrian Economic Center, as part of the Free Market Road Show global event series in partnership with the local organizer Ayn Rand Center Romania.

Thus, the specialists present at the event are of the opinion that a society without cash would not be beneficial for people, because it would lead to violations of individual autonomy and human rights.

Present at the debate on the future of money, Barbara Kolm, founder of the Free Market Road Show, director of the Austrian Economic Center and former vice-president of the National Bank of Austria, explained that a digitized national currency would be legally problematic being produced and implemented by state compared to cryptocurrencies which are a private product and a great invention.

“Cash represents the freedom to act and was until now the only legal means of payment. The advantages of cash are obvious, in addition to anonymity, tangibility, simplicity and finality of payment, its storage and robustness due to independence from technical devices, while digital currencies promise convenience, efficiency and inclusion. However, a distinction must be made between privately issued cryptocurrencies such as Bitcoin and the development of central bank digital currencies (CBDCs). In the ever-evolving financial technology landscape, the future of money lies at the intersection of tradition and innovation, with private FinTech companies leading the way. The future of money also depends on the social values ​​that shape our financial systems. However, the continued digitization of payments presents both opportunities and challenges, ranging from greater convenience and security to data protection concerns and economic and individual freedom. The future of money lies in finding a balance between the efficiency of private digital payment providers (currencies) and the sustainable trust and versatility of cash as society moves towards a more connected and inclusive financial system”, said Barbara Kolm.

Digital currencies, life with dynamic prices

In an increasingly digitized world, the idea of ​​giving up cash transactions and using virtual money exclusively is becoming more and more attractive. However, this change would have profound implications for how people interact with money and merchants. One of the major aspects is that every merchant would have access to a huge amount of data about our buying behavior, which could lead to dynamic pricing of products. This is just one of the challenges and opportunities that a cashless society would bring.

“I am of the opinion that, at the current moment in which society is, digital currency cannot be a viable full-time solution and we cannot give up physical currency. From a privacy perspective, a virtual currency now will lead to some pretty serious infringements on our individual autonomy. For example, there will be a fingerprint on all the purchases we make. Thus, any retailer would have access to the information and would know what each of us buys and how often each of us buys, being able to set prices based on these aspects, i.e. higher prices for certain products that we buy often. It is a problem of confidentiality of information, but also of morality and ethics, the data being with a private entity. In addition, from the point of view of GDPR, the existence of a virtual currency could not be compliant”, said Cristiana Deca, co-founder of Decalex Digital, a company specialized in data protection, GDPR and cybersecurity.

“Would you like people’s lives to work like Uber, that is, with dynamic prices for products and services? That could generate AI by giving more power, especially through the creation of digital currencies. Artificial intelligence can be used to the advantage or against humans. With the advance of digitization, the influence of AI and the digitization of money, we must be aware that people and their purchasing behavior will be monitored, as is now the case with social media activity where everything is controlled by algorithms. In the absence of GDPR regulations for data protection and the ethical use of AI, social media would have manipulated people’s autonomy. We cannot talk about digitization without data protection because it is the fundamental right of people, therefore, we have the right to have whatever we want in life and at home without being monitored”, added Cristiana Deca.

At the same time, Mirela Pascu, founder of the Ayn Rand Center Romania association, emphasizes that people should still have the right to choose in general and in particular related to the method of payment.

“Many people probably wonder what money, artificial intelligence and data protection have in common. The common element is the fundamental freedom of man to choose, therefore to be human. Money is a material form of the principle that people who want to deal with each other must deal with exchange and give value in exchange for value. Money is made by those who think, by those who decide and act creating value based on what they think. Money is made by the effort of every honest man, each according to his means. An honest man is the man who knows that he cannot consume more than he has produced. Money made honestly is, therefore, a manifestation of the fundamental right of private property, and by no means collective. The right to private property is a fundamental right of human freedom and this right must be defended because it already manifests itself constantly, being accompanied by actions contrary to it both in the monetary area, in the area of ​​the so-called “intelligence” more or less artificial, as well as in the area of ​​our personal data”, explained Mirela Pascu, founder of the Ayn Rand Center Romania association.

Will cash disappear?

At the same time, the specialists present at the event about the future of money emphasized that, although the progress of digitization is increasing, cash will not disappear completely. Instead, digital payment methods will be increasingly used and there will be a transfer of national monetary political decisions to international ones, at least in the European Union, claims Krassen Stanchev, professor of Macroeconomics at the University of Sofia, Bulgaria.

“Cash is the box of mediums of exchange that we control to a comparatively greater extent than any other type of currency, whether digital, blockchain-based, a metal and/or commodity standard, or just units of account similar to the former ECU (European Monetary Unit), which was the unit of account of the European Community. For this simple reason, cash is an important ingredient of trust in a particular medium of exchange. Cash, too, is subject to manipulation by institutions other than those that issue money, i.e. our private central banks, and could suffer from inflation tax and easy confiscation. But the physical availability of this box in the hands of money holders makes outright confiscations costly and visible. If we go by the logic of inflation = government intervention – “national projects/priorities” – no option to raise taxes – political pressure on money issuers to finance “priority tasks” = digital currency has a disadvantage compared to cash: it’s easier to handle,” Krassen Stanchev said.

Also, the specialists present at the debate about the future of money pointed out that humanity now lives in two different worlds at the same time: the real one and the virtual one. Thus, Lucian Botea, Doctoral Lecturer at the Romanian-American University, emphasized that the future of money will be at the intersection between traditional and virtual money, the role of cash being to offer more freedom. At the same time, he highlighted that Romania is still a country with cash payments, especially in rural areas, but there is an increase in the appearance of digital currencies, but there is a lack of trust in them.