Redefining Money: Trust, Technology and the Future of Currency

As our world becomes increasingly digital, the concept of "currency" or "money" continues to evolve and grow more complex.

Historically, currency was introduced to streamline trade. Rather than exchanging goods directly — a process with many practical challenges — currency served as a widely accepted intermediary. In its early forms, currency had intrinsic value, often crafted from precious metals. Over time, however, its value came to depend on trust: if we collectively believe a note is worth 50 EUR, it holds that worth.

Today, as money becomes more digital, this trust is harder to define. Fiat money, for example, is backed by governments, which helps support trust, particularly in developed nations. In contrast, cryptocurrencies derive trust from software protocols and, in some cases, from the companies behind them. Certain cryptocurrencies, like stablecoins such as USDC (managed by Centre) or Tether (managed by iFinex), have corporate entities backing them. Others, like Bitcoin or Ethereum, rely on open-source communities without a central authority, making the concept of "currency" even more elusive.

This raises an important question: are cryptocurrencies truly currencies, or are they more securities and thus oriented toward investments? The line between the two is often blurred, as even fiat currencies can serve as investments. Ultimately, the distinction may lie in their actual use: when used as a daily payment method, they function as currency, whereas if held with the intent to convert later, they resemble investments.

As money evolves, new forms continue to emerge — from cryptocurrencies and Central Bank Digital Currencies (CBDCs) to gift (like Apple Store, Amazon Gift Card, Steam Gift Card…​) and social vouchers (like meal or service voucher), digital prepaid wallets (like PayPal, but also Starbucks store wallet), gaming currencies (like Robux, V-bucks, Minecoins or PokéCoins) and even local forms like city coins. While the evolution of money is not new, the pace of technological advancement today is unprecedented.

We may be nearing a turning point as trust in major global currencies (like the USD, EUR, GBP, and JPY) faces new challenges. The U.S. dollar has held its place as the world’s principal reserve currency since World War II, but rising political tensions and the economic ascent of BRICS nations are now driving moves toward de-dollarization. With U.S. public debt reaching $35.5 trillion by September 2024, trust in the dollar is increasingly strained. This shift is evident in the dollar’s declining share in global foreign exchange reserves—from 85% in 1970 to 58% today. Although this 58% still reflects a dominant position, the trend is clear. Other major reserve currencies, such as the EUR, GBP, and JPY, have seen little change in their shares, suggesting that the Chinese renminbi and other currencies are gradually gaining ground.
This trend is not surprising: historically, the dominant international reserve currency has aligned with the prevailing global power. With the influence of the U.S., UK, Europe, and Japan on the decline and the BRICS countries on the rise, this shift is understandable.

The increasing digitalization of currency has also elevated its role as a powerful political tool for governments and central banks. In response to crises — including the 2008 financial crisis, the COVID-19 pandemic, and the energy crisis — central banks have conducted massive monetary experiments. From quantitative easing (QE) to Open Market Operations, these policies have been deployed to fight the economic impact of those crises, but at the same time contributed to substantial inflation.

This inflation is striking when looking over a long period. Consider U.S. housing prices:

• In 1965, the median home price was approximately $25,000.
• Today, that figure is around $400,000.

That is a sixteen-fold increase. Yet, if we look at home prices in terms of gold, the change is less drastic and even inverse:

• In 1965, the median home price would be about 16 kg of gold.
• Today, it is around 6 kg.

Gold's purchasing power has clearly remained more stable than that of fiat currencies. This stability underpins gold’s reputation as a reliable hedge against inflation. Gold’s supply is naturally limited, unlike fiat currency, which can be expanded through credit creation. This comparison illustrates that, while U.S. home prices have surged in dollar terms, they have remained relatively stable in terms of gold, which has preserved its purchasing power over the long run.

Today, cryptocurrencies are also positioned as a potential hedge against inflation. Many cryptocurrencies have a fixed total supply, which ensures scarcity. For example, Bitcoin’s total supply is capped at 21 million BTC (of which nearly 20 million have already been issued). This limit is embedded in Bitcoin’s protocol and is crucial for its deflationary nature.
As a result, Bitcoin is theoretically well-hedged against inflation. However, recent years of speculative investment usage make this difficult to demonstrate. For example, the average price of BTC was $356 in 2014, $7,572 in 2018, $28,859 in 2022, and today sits around $75,000. While the value of 1 BTC has clearly risen, if Bitcoin became widely accepted as a means of payment rather than a speculative investment, its value should be more stable, as otherwise risk for parties involved in the transaction becomes too big.

Clearly, currency is evolving, and alternatives to traditional cash are emerging daily. Many of these innovations aim to:

• Lower the cost of transferring money globally,
• Speed up the process of cross-border transactions, and
• Provide independence from local political instability, which can introduce volatility and lead to inflation through monetary policies (e.g. printing more money, central banks purchasing assets to boost liquidity, or devaluing the local currency).

As money becomes increasingly digital, the world grows more interconnected, and global dynamics undergo profound shifts, it’s clear that we are on the brink of a transformative shift in how we understand and use money.

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