Hardly a week goes by without many Americans receiving some type of notification of the pending doom of the American dollar — if not the end of the American dollar as the basis of our financial system, then at least the elimination of paper currency as we know it. While I don’t see the end of our financial system in the foreseeable future, I believe it is only a matter of time before we see the end of our paper currency.
One can already see the trends in our daily lives where paper currency and coins are no longer accepted by various merchants, at college or professional sporting events, used to purchase tickets for bus and train transportation and to pay for parking meters. The rejection of paper currency or coins as a means to purchase and pay for items will continue to increase until there will cease to be any reason to carry paper currency or coins.
There are differing views on why the United States might soon eliminate paper currency and coins and whether this is a good thing, bad thing, or a little of both. The US spends tens of millions of dollars each year printing paper currency and stamping out coins. If one objective was to save the cost to produce these, one would have thought that we would have eliminated at least the penny many years ago and maybe even the nickel similar to Canada who eliminated the penny at a savings upwards of $100M over the past decade. Recently, the US Treasury announced that one-cent coins will be phased out in early 2026.
So, if the idea of eliminating currency is not just to save the cost of producing the currency, what would be the major reason for doing so? The goal seems to be two-fold. First, there is a certain convenience to not having to carry around cash. With a bank card, credit card, debit card, phone (tap to pay) or whatever the mechanism will be used to pay for items when currency is eliminated, one will not have to be cashing checks, running by banks or stopping at ATMs. This card, or whatever is used for these financial transactions, will be all one needs.
The second goal of a cashless or paperless financial system is to make it easier for the government to know what an individual is paid by an employer, what they receive from the sale of stocks, properties, vehicles, etc. Uncle Sam will also know what they spend their money on and where they spend it, and maybe most importantly know the names of all the parties involved with any financial transaction. By having all this financial information for an individual readily available in a database, taxes can automatically be paid out or refunded, government programs can quickly and accurately calculate payments to individuals, and all transactions can be more easily tracked to determine if any illegal or improper transactions are being made. While there are benefits to the government having an individual’s financial information, apparently a large portion of the population is concerned that the government will now know exactly what you are spending your money on and to whom this money is going. However, this knowledge, if not kept secured within the government’s system, is everyone’s concern as this information must remain confidential and any release of this information would be deemed an invasion of one’s privacy. In addition, we all recognize the growing problem an account being hacked. Once an account of an individual, business, or financial institution has been hacked, it frequently takes a tremendous amount of time and effort to rectify the situation even if no monies are ultimately lost.
While hacking and the unauthorized tracking of one’s financial profile are two major concerns, another concern can be seen on a seemingly smaller scale. Right now, when there is a problem with an individual’s account at a store or business such as an unauthorized transaction or a disputed charge, it often takes days, if not longer, to resolve the problem. It gets even worse if the problem is with a financial institution. Financial institutions may often place a hold on an account until the problem is addressed. Placing a hold on the account means that things like automatic payments from that account cannot be processed until the hold is released. An individual then must contact whoever was expecting the automatic payment and find another way to make that payment until the hold is released on that account. If the unauthorized transaction or disputed charge is a relatively small amount, many of us simply will not dispute the charges to avoid having a hold being placed on the account.
The disruption to one’s account to dispute a relatively minimal charge is just not worth it. Even worse is when the problem is with a governmental program such as the Social Security Administration, Medicare, Medicaid or any large government agency. It often takes months to have problems such as disputed or incorrect charges or payments resolved.
With digital currency transactions being performed by government software programs, there will be billions of transactions recorded each day and trillions of transactions annually. With this sheer volume of transactions, it is highly unlikely that there could ever be enough human resources to address all the problems and disputed transactions that each of us now see from time to time. More than likely, in the future one is going to be at the mercy of AI to help address these items. Some may believe that having AI resolve these problems will be substantially better than having an actual person review the situation. However, based upon the experiences of many of us, unless AI gets substantially better in knowing how to address these issues, the frustrations we currently face when trying to have some of these problems resolved will only get exponentially worse in the future.
Banks as we know them will certainly change or disappear. There will need for institutions of some type to handle transactions on a more local scale. But those transactions will ultimately have to be sent to a system that stores that information in a regional or national database. The digital currency can work, but there are a number of issues that must be better addressed if we are going to avoid some of the concerns people are expressing. Many of us just don’t feel the government will adequately address those before turning to a digital currency and that is what many of us struggle with.
