Crypto market

Transition from cash to digital money: new challenges and problems

29 November 2023

The gradual shift towards a cashless society and the diminishing role of physical cash raise new pressing questions, such as the limitation of personal freedom and privacy concerns. The issuance of central bank digital currencies (CBDCs), whose prospects are increasingly being explored by central banks worldwide, only amplifies these concerns.

Evolution of money: moving away from cash

The traditional jingles of coins and rustling banknotes are gradually disappearing, replaced by the continuous hum of digital transactions. The share of non-cash payments is growing worldwide, with particularly rapid growth in developing countries in recent years.

The COVID-19 pandemic undoubtedly gave a significant boost to this process, but even after the end of quarantines and lockdowns, the decline in the role of physical cash does not diminish. In many countries (from Brazil to Kyrgyzstan), where in 2020 the share of non-cash payments was less than 30% of the total number of transactions, it now exceeds 60%.

However, as physical cash takes second place, concerns about the loss of personal freedom and privacy come to the forefront.

CBDC — a potential solution or a new threat?

Central Bank Digital Currencies (CBDCs) are a digital representation of a country’s official currency, backed by the central bank.

CBDCs have great potential for optimizing transactions, reducing costs, and expanding access to financial services.

However, at the same time, CBDCs can serve as a powerful tool for suppressing individual freedoms. Their introduction raises questions about the extent to which digital transactions can be tracked, monitored, or even used as a weapon against the citizens they are intended to serve.

From the expert community, there are regular calls to use privacy protection technologies in the development of CBDCs that could make their use almost as untraceable as using cash.

For example, the use of zero-knowledge proofs and other methods limiting central banks’ access to transaction information are suggested. Or, at least, allowing citizens to self-regulate the “visibility” of their transactions for regulators. Theoretically, such implementation of CBDCs is possible, but in practice, it is extremely challenging to interest central banks in such an approach.

Security and assurance issues

The transition to non-cash payments and, subsequently, to CBDCs makes the issue of ensuring cybersecurity even more serious. The risks of account hacking, online fraud, theft of funds, and personal data significantly increase as society moves away from physical cash.

Therefore, central banks must invest in advanced security measures to strengthen the infrastructure supporting CBDCs. Security and the ability to provide assurances to users are hardly the main advantages of CBDCs over other digital assets, such as “traditional” cryptocurrencies. 

User education

Despite the growing penetration of digital payments and cryptocurrencies into various aspects of life, a significant portion of the population, even in developed countries, has a very poor understanding of digital currencies.

Educational campaigns illustrating the advantages of digital currencies and explaining existing mechanisms for protecting user privacy and their funds can significantly help overcome the challenges of digital currencies. An informed population will be better prepared to responsibly handle CBDCs and defend their rights when necessary.


The reduction in the use of physical cash has heated discussions about personal freedom and privacy concerns. When developing and implementing CBDCs, central banks will need to strike a delicate balance between convenience, security, and the preservation of individual freedoms. Additionally, central banks must work on reliable security measures and comprehensive user education initiatives.

The development and widespread adoption of CBDCs will undoubtedly shape the future of financial transactions. Therefore, it is crucial that this development does not harm the fundamental values of personal freedom and privacy.