Money in modern time and how it affects central banking in the

Money in modern time and how it affects central banking in the digital age
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Table of Contents
I ABSTRACT..................................................................................................................................3
II RESEARCH STATEMENT........................................................................................................4
III LITERATURE REVIEW...........................................................................................................5
Account and Token based systems..............................................................................................8
Actual performance of Central Bank Money in Advanced and Emerging Economies...............9
Definition of money after emergence of electronic money.......................................................11
Issues faced with digital money.................................................................................................18
IV THEORITICAL PERPESCTIVES..........................................................................................22
V RESEARCH QUESTIONS.......................................................................................................29
VI RESEARCH METHODOLOGY.............................................................................................29
VII RESEARCH STRUCTURE....................................................................................................31
References......................................................................................................................................34

I ABSTRACT
This research has focused on money in modern time and hoe it has been affects central bank in
the digital age. Money is a financial instrument that has been fulfilling basic function of
exchange and standard of deferred payment. The function has been a medium of exchange that
allows efficient transactions of goods and services in barter system. Commercial banking
emerged as a form of financial link between depositors and borrowers. Economic development
exchange took place in the form of barter that can be exchange of goods to goods. However,
economy of barter system has been facing difficulties then money need to introduce for the
exchange of goods. Money has been most import part of modern economy. This research focuses
on impact of money in the digital age. The use of money in the central banking has been
discussed in the research.

II RESEARCH STATEMENT
This research has focused on importance of money in the digital age. The impact of money in
modern time in central banking has been related in this research. The technological and
economic development has helped in introducing Digital Currency. It is a form of currency
which can be available in the digital form. It helps in immediate and fast transaction. This
research has been focused on utilization of digital money in the digital age.1 The central bank
digital currency can be known as CBDC which can be centralized and decentralized. The main
research issue is based on fact that the traditional central banking system has been affected by the
new concept of digital money. The technological changes in the central banking has affected
traditional method of banking. The main focus of the research is to survey on problems that the
central banks have been facing with the increase in utilization of digital money. There are several
general properties of digital money. Digital money used to breaks barriers of time and place.2 It
helps in making economic transactions more convenient. The emergence of digital money has
created various business model and effectively promoted business practices including online
platforms. The contemporary monetary system has sole right to link cash with money. The
change in the trend has led to conversion of traditional money into digital currency. Mary Brophy
Marcus, "Crowdfunding" (2015) 37(5) Oncology Times.
1 Lisa Adkins, "What Can Money Do? Feminist Theory In Austere Times" (2015) 109(1) Feminist Review.
2 Mark Barrow, "Debate: Managing Motivation In Hard Times" (2015) 35(5) Public Money & Management.

The digital age has seen invention of digital currency that has helped in easy transaction.
The shift in currency has changed upcoming banking system. Systematic development of
electronic money in the market has led top drastic changes in the business scenario.
Various online companies have started in the market which has been based on the digital
money. Various identity of digital money has detected in the form of crypto currencies and bit
coins. Banks have been facing issues related to the emergence of digital currencies. These
digital currencies have been important to track and maintain their transactions. The digital
currency contains reference number which cannot be repeated and different human resource.
The prepaid and post-paid payment mechanism has been enabling digital payments with the help
of the internet. The digital money has been termed as the online currency that can be transferred
or transacted using the internet.3 The use of digital currency has been helping in providing an
edge to the banking systems. The traditional banking systems have been facing challenges in the
digital age. The banking systems have been outdated and do not support online banking systems.
The possible influence of e-money has created a professional interest in the banking systems.
Money has changed a lot in the digital age. The value of money has been increasing with
increase in time period.
III LITERATURE REVIEW
Digitalization has redesigned economic and financial activity in the banking systems.
Social changes have been modifying the basic accordance of the banking systems. Monetary
policies in financial industries have been changing their effect in the market. The financial
3 Seyed Mohammadreza Davoodalhosseini, "Central Bank Digital Currency And Monetary Policy" [2017] SSRN
Electronic Journal.

institution has helped in providing keen approach in the market. The digital transformation has
affected customers in their buying behaviour. The offline mode of transaction has been depleted
in the digital age. The online transaction has been helping in attracting various numbers of
customers in the banking institution. The payment system in banks have changed a lot with
influence of digital money in the market. The Central Bank Digital Currency (CBDC) has been
widely accessible digital platform for a legal tender.4 A huge number of Central banks have
issued digital money in the form of reserves. The use of various methods in the digital money
transformation has been maintained in the banks. The digital money has been the key focus of
the central banks all over the world. A brief introduction of the digital money has been started in
beginning of 21st century. Various drivers in CBDC have been based on technological
opportunities in the banking systems. The crash in the monetary policies of banking systems.
However, Central banks continues providing a legal tender in case cash is not present ion the
bank. Previous studies based on the money control have reflected that the change in the value of
money has been the main effect for the digital transaction in the market.5
The monetary policies in the banks have been affected by the invention of digital money
in the market. The cashless transaction in the market has led to the use of digital money in the
market. There has been decrease in the use of cash money in the market. The innovation in
market has been due to the technological impact in the market. The future of central banks have
4 Greg N. Gregoriou and Lam Pak Nian, "Handbook Of Digital Currency: Bitcoin, Innovation, Financial
Instruments, And Big Data" (2015) 18(2) The Journal of Wealth Management.
5 KiHoon Jimmy Hong, Kyounghoon Park and Jongmin Yu, "Crowding Out In A Dual Currency Regime? Digital
Versus Fiat Currency" [2017] SSRN Electronic Journal.

been based on the amount of transaction in the banks. Customers have been looking for the
digital transaction of money with the help of internet. A survey says that amount of cashless
transaction has increased by 14 % in last two years.6 The bank has faced issues with the
involvement of e-money by customers. The possible effects of electronic payment have been
distinct from conventional payment system on central banks and their policies. Various values
have been utilized for exchange of commodities and goods since existence of civilians. It has
been uncontroversial that central banks plays a role in giving accounts to financial institutions to
allow them safely settle interbank transactions. There is less agreement of central banks need to
operate and oversee infrastructure with these systems. Access policy has been an important lever
that central banks need to manage threats and risks of these systems. Limitations of access of
financial institution for high value payment systems providing rise to the systems. A new form of
money of central bank has implications for competitions of means related to payments. The
transmission of monetary policy and welfare have been competing with other form of money in
the market. E-money was not possible till 1990s and later on new technologies in the
commercialization have helped in making it possible by the need of 20th century.7 Central bank e-
money need directly compete with commercial banks deposit which need both modes of
payments and store of value. Previously there have been some examples of new financial
technologies and infrastructure having adverse effects on financial stability.
6 Dejun Li, Jianbao Huang and Lingcong Wang, "The Impact Of Digital Currency On The Financial System:
Universal Decentralized Digital Currency, Is It Possible?" (2019) 5(2) Journal of Economics and Public Finance.
7 Yuhan Liu, Xiaowei Chen and Dan A. Ralescu, "Uncertain Currency Model And Currency Option Pricing" (2014)
30(1) International Journal of Intelligent Systems.

Account and Token based systems
Account and token based payment system that are largely distributed by their
requirements. A transaction need to be satisfactory in an account based system payer need to be
identified as holder of the account from which payment have been made. Record keeping
arrangements include two features including access permission to the records and protocol to
update the records. These features helps in determining which parties in system need to access
records and update it properly. Cash is a type of token system. Cash summarizes past production,
trade and consumption decisions.8 Crypto currencies including Bit coins are token systems in
which records are decentralized as they are distributed in the network. The records of bitcoin
system is called as blockchain that is updated in a distributed form. Financial infrastructures
including high value payment systems (HVPS) are centralized in sense that operator of the
infrastructure has control over the records. This infrastructures have been based on the records of
trusted customers updated by a single party.9
Record keeping systems are trade-offs in their level of access, security and privacy. In
case of expansion of access to system, security become less from admitting dishonest
participants in the banking systems. The digital platform has been increasing in a daily basis
from customer, employer and worker. The online transaction of money has increased in the
scenario. The digital age has experienced the effect of digital currency in the market. The
8 Justin Merrill, "Wixle: An Elastic Digital Currency" [2014] SSRN Electronic Journal.
9 CHRISTIANE NICKEL and ANDREAS TUDYKA, "Fiscal Stimulus In Times Of High Debt: Reconsidering
Multipliers And Twin Deficits" (2014) 46(7) Journal of Money, Credit and Banking.