Managing Digital Money

Money, as Lisa Minnelli and Joel Grey sing in the movie Cabaret, "makes the world go around".Since gold coins emerged in Turkey over 2500 years ago, money as a measure and store of value and medium of exchange has been crucial for economic and social development.Commerce relies on the ability of strangers to transact over time and distance, and money allows them to do so.The forms of money have changed along with technology.Coins valued on their precious metal content were replaced by symbolic base metal and complemented by intrinsically worthless notes made of paper.As the information technology revolution progressed, and especially since credit cards were introduced in the 1960s, financial dealings have become increasingly virtual (Ferguson 2012).Cash accounts for only 7 per cent of the USA's economic transactions.Trades, loans and purchases are increasingly being undertaken digitally.Capgemini estimated 57 billion credit card transactions were undertaken in 2012. 1 A new technology, digital money, has emerged as a medium of exchange and a measure and store of value in electronic form.It is used in the commercial transactions of goods and services in a highly connected world where trade is increasingly globalized and where the majority of the world's population is becoming urbanized.Digital money has been facilitated by use of technologies such as mobile phones, cloud computing, data analytics, encryption and storage and near field communication technology.Diffusion of these technologies is likely to accelerate the virtuality of transactions, and hence their scale and scope, lubricating frictions in the financial system to make "the world go around" more quickly and extensively.Digital money dematerializes by moving everyday economic transactions -payments, transfers, receipts -from the physical to the digital world.Although its progress will be evolutionary as the technology and its social and economic influences interact, it is potentially a