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What is Digital Money?
Digital money (or digital cash) is any method of payment that is entirely electronic. Digital money, unlike a dollar bill or a coin, is not physically palpable. Online systems are used to account for and transfer it. The cryptocurrency Bitcoin is a well-known form of digital money.
Fiat currencies, such as dollars or euros, can also be represented by digital money. Smartphones, credit cards, and online cryptocurrency exchanges are all used to swap digital money. It can be turned into physical cash in some situations by using an ATM.
Understanding Digital Money
Cash maintained in online bank accounts is a type of digital money that exists in society today. This money can be sent to or received from others. It is also suitable for internet transactions.
Digital money is comparable to cash in that it can be used as a unit of account and a medium for daily transactions. However, it is not money. Dollars in your online bank account, for example, are not digital money because they take physical form when you withdraw them from an ATM.
Digital money differs from cash in that it streamlines the monetary transaction process. For example, digital money’s technological rails can make financial transfers across borders easier and faster than traditional money. This type of money also simplifies the process by which central banks implement monetary policy. Because some forms of digital money use cryptography, transactions using them are tamper-proof and censorship-resistant, which means they cannot be controlled by governments or private agencies.
Given these benefits, digital currency has become a top focus for a number of governments throughout the world.
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