Outline: Should Digital Currency Replace Paper Currency in the United States?
i. Imagine a world where everyone uses electronics or cards to conduct financial transactions? A world where no one exchanges cash or coins for payment for service but a swipe of a fob or press a button, and currency is transferred.
b. Preliminary Thesis statement
i. In the United States, replacing paper money with digital currency as legal tender will eliminate the requirement for government insurance on deposits with financial institutions while maintaining the currencys liquidity.
ii. Some feel that digital currency increases the danger of cyberattacks and weakens the foundation of financial security; however, an increase in Cybersecurity professionals and user privacy protection guidelines will reduce those concerns.
2. Body Paragraphs
a. History of currency in the U.S.
b. Global Impact of U.S. Currency
Digital currency should replace paper currency as legal tender
Argument#1: Digital Currency risk-free liability of the Fed removes the need for government insurance on deposits
Argument#3: Digital Currency can be saved as liquid asset outside of the private financial system
Counter#1: Cyber-attacks / CBDC failures
o Rebuttal#1 Increase Cyber Security professionals
o Rebuttal#1 Importance of US CBDC that will encourage global support
Counter#2: Weakens the financial security provided paper currency
o Rebuttal#2: Protect user Privacy & reduce the risk of inadvertent loss of funds
o Rebuttal#2: Advance payment-related crime-fighting tactic
d. Concluding Technique:
i. A system that will support digital currency transfer exists within the infrastructure of cross-border financial markets.
ii. The U.S. creation of a CBDC will have a galvanizing effect on global support for CBDCs worldwide.
iii. The U.S. can learn from other nations failed attempts and create a digital currency that will set the standard for the rest of the planet.
Should Digital Currency Replace Paper Currency in the United States?
Imagine a world where everyone uses electronics or cards to conduct financial transactions. A world where no one exchanges cash or coins for payment for products or services rather uses a swipe of a fob or press of a button, and currency is automatically transferred to the recipient. In the United States, replacing paper money with digital currency as legal tender will eliminate the requirement for government insurance on deposits with financial institutions while maintaining the currencys liquidity. Indeed, this transition is already underway but some consumers feel that digital currency increases the danger of cyberattacks and weakens the foundation of financial security. An increase in cybersecurity professionals and user privacy protection guidelines, however, will reduce those concerns. The purpose of this paper is to provide a brief history of currency in the U.S., an assessment of the global impact of U.S. currency, and an analysis concerning the respective strengths and weaknesses of transitioning to a digital currency. Finally, the paper presents a summary of the research and key findings concerning these issues in the conclusion.
History of currency in the U.S.
During its 244-year history as a nation, the United States has used two basic monetary systems for its public sector currencies. The first monetary system that was used in the U.S. was a bimetallic standard using gold and silver that was based on fundamental constitutional authority. For example, Article I, Section 8, Clause 5 of the U.S. Constitution specifically stipulates in part that, The Congress shall have Power . . . to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. This authority means that, In practical terms, [the Constitution] said that any legal tender money created by the federal union or the states or the people had to be gold or silver coins, or redeemable in gold or silver coins of specified weight and fineness (Timberlake, 2012, p. 349).
This bimetallic standard, however, was changed into a monometallic gold standard by 1879 which was subsequently eliminated by the mid-20th century due to the cumbersome nature and increasingly impractical terms of the standard (Timberlake, 2012). For instance, according to the historians, On June 5, 1933, the United States went off the gold standard, a monetary system in which currency is backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold (FDR takes the United States off the gold standard, 2021, para. 3). Since that time, the U.S. dollar has assumed increasing importance for the global economy and these issues are discussed further below.
Global impact of U.S. currency
Over the past several decades, the U.S. dollar has gained increasing importance in the conduct of international commerce. This importance is attributable to the comparative enormity of the U.S. economy as well as its stability in an increasingly…threaten national security interests and have truly global implications that could devastate the worlds financial network for weeks, months and even years.
Proponents of digital currencies, of course, cite the ability of cybersecurity professionals in preventing such attacks in the first place and their ability to respond to them effectiveness if they do ocur, and additional resources could be directed at this resource given the significant cost savings that are associated with the transition to digital money. Further, the need for this transition has become even more important due to the increased prominence of other national currencies in the global marketplace. For instance, according to Ney (2020), The US dollar must go digital. A digital dollar will not only benefit the US economy through financial stability at home, it will also improve Americas financial security abroad, particularly in light of Chinas economic rise (p. 74). Moreover, the U.S. is well positioned to assume the vanguard in this area, and a strong central bank digital currency will encourage additional support from other members of the international community.
Here again, though, many of these advantages have some corresponding disadvantages, including the potential for a U.S. CBDC to weaken the current level of financial security that is provided by paper currency. This constraint, however, is also offset by the privacy protections afforded by a digital currency as well as the reduction in advertent loss of funds such as the destruction of paper currency in a fire or other disaster. In addition, the potential for a U.S. CBDC to weaken financial security afforded by paper currency is the ability of cybersecurity professionals to use these privacy protections as an advanced payment-related crime-fighting tactic.
The research was consistent in showing that a system that will support digital currency transfer currently exists within the infrastructure of cross-border financial markets. Likewise, the research also showed that the creation of a CBDC by the United States will have a galvanizing effect on global support for CBDCs worldwide. The U.S. public and private sectors already have substantial experience in using certain types of digital money, and this experience could be brought to bear in implementing and administering a world-class CBDC. Further, such a transition to a digital currency would also be facilitated by the fact that the U.S. can learn from other nations failed attempts and create a digital currency…
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