In sum, it may be too soon to write Dollar Bill’s obituary. Demand for his services remains strong. It may make sense for central banks to offer digital services to nonbanks, perhaps partly to avoid the loss of seigniorage income, which would enrich Facebook, rather than governments, in a Libra-dominated world. But unless central banks wish also to enter the credit allocation business, they will want to avoid large-scale disintermediation of the banking system.
I suspect that, for the foreseeable future, we will live in a kind of mixed-economy payment system. Cash will continue to play a role, albeit a more modest one than in the past, alongside a variety of cards and direct digital transfers.
Howard Davies, the first chairman of the United Kingdom’s Financial Services Authority (1997-2003), is chairman of the Royal Bank of Scotland. He was director of the London School of Economics (2003-11) and served as deputy governor of the Bank of England and director-general of the Confederation of British Industry.