STEVE INSKEEP, HOST:
For centuries, the world has relied on physical money - coins and bills. Now it's possible to go days, weeks, months, even years without handling cash at all. There are not only cards, but also cash apps, like Venmo and Apple Pay, and also cryptocurrencies, like Bitcoin. Now the U.S. government is thinking about creating its own digital currency.
Here's NPR's David Gura.
(SOUNDBITE OF SILVERWARE CLANKING)
DAVID GURA, BYLINE: The other day, I went to get a cup of coffee.
Could I just get a latte, please?
UNIDENTIFIED PERSON: Of course. For here or to go?
GURA: To go, please.
I reached for my iPhone. I opened the Wallet app.
UNIDENTIFIED PERSON: You're all set.
GURA: Do you take Apple Pay?
UNIDENTIFIED PERSON: Yes, I do.
GURA: And before my order was even ready, I got an email with a receipt. It seemed fast. The transaction was pretty straightforward.
But Chris Giancarlo, who used to be one of the country's top financial regulators, says that when you make a mobile payment, a lot happens behind the scenes.
CHRIS GIANCARLO: My mobile device tells his mobile device to inform a whole series of banks to confirm who I am, how much money is in my bank, that there's enough money to move from my bank to his bank.
GURA: And there were transaction fees along the way, which add up. They totaled more than $110 billion in 2020. And while they may be invisible to many of us, they're not to businesses that pay them. Giancarlo imagines a world without these fees, where we have the option of using digital dollars. There's a lot to be hammered out. But the Federal Reserve could make them. They'd be in circulation like paper bills, and we'd keep them in digital wallets on our smartphones. So transactions wouldn't seem all that different from ones involving Apple Pay or Venmo. But Giancarlos says it would be very different behind the scenes, with no middlemen charging fees.
GIANCARLO: The beauty of this system is speed, lowering of costs and immediacy.
GURA: This is one argument for having a government-issued digital currency. Another one is it could help people who don't use banks but do have smartphones.
Raghuram Rajan is a finance professor at the University of Chicago and a former governor of the Reserve Bank of India.
RAGHURAM RAJAN: Many people don't have access to credit cards, especially poorer people. And so what the introduction of the digital dollar could do is, first, give a lot more people access and, second, create competition.
GURA: Even if millions of Americans decide not to use digital dollars, just having the option could put pressure on banks and payment processors to lower fees. It'll be up to Congress to decide if the government should mint digital money along with paper bills. But the Fed, which would oversee it, has kicked off the debate with a comprehensive paper on potential advantages and disadvantages. And there are risks. We've seen an uptick in cyberheists and ransomware attacks. But according to Rajan, privacy may be the biggest hurdle. The government could know more about how you spend your money and where you spend it.
RAJAN: And there would be legitimate questions about how much the government knows about each individual and also how much it can act to restrain activities by individuals.
GURA: Having a digital dollar would require huge changes to the U.S. financial system. So the U.S. is proceeding cautiously. Some would say slowly. But a handful of countries have modernized their money already. China is already piloting its own digital currency. They're setting global standards. And there's fear that could threaten the dominance of the U.S. dollar.
David Gura, NPR News, New York.
(SOUNDBITE OF AMBINATE'S "STORM WATCH") Transcript provided by NPR, Copyright NPR.
