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Digital currencies are assets that are only used for electronic transactions. They do not have any physical form, although they can be exchanged for regular money or other assets.

As people move toward more electronic or digital forms of payment, it might seem like paper money is on its way toward obsolescence. But experts say that cash will always be around.

History. In 1983, American cryptographer David Chaum conceived of a type of cryptographic electronic money called ecash. Later, in 1995, he implemented it through Digicash, an early form of cryptographic electronic payments.

Not only does the Fed have no plans to issue a digital currency, but it has repeatedly said it wouldn't do so without authorization from Congress. How one might work?including how closely it might imitate physical cash?is still a wide-open question that can only be answered through research and testing.

We think the Federal Reserve will continue to emphasize incremental technology improvements versus a risky push to transform the payments infrastructure. Bottom line: Commercial bank accounts and physical cash are likely to remain at the center of U.S. financial architecture for the foreseeable future.

A digital dollar would be a form of legal tender in the U.S. that could be used to purchase goods and services, and settle all and any outstanding debts. But it would exist in virtual form only, stored and exchanged online via computer networks, never taking the physical form of paper banknotes.

Preparing for a world of CBDCs Prepare consumer-facing wallets. Build tech to custody CBDC keys. Maintain trusted security infrastructure. Develop accompanying KYC and AML tools for digital payments transactions. Develop new customer services and products.

Digital currency has the potential to completely change how society thinks about money. The rise of Bitcoin (BTC), Ethereum (ETH) and thousands of other cryptocurrencies that exist only in electronic form has led global central banks to research how national digital currencies might work.

Examples of countries with CBDC initiatives include the following. Examples include the Sand Dollar by the the Central Bank of the Bahamas, the Naira in Nigeria, the Digital Rupee launched by the Reserve bank of India, and the Digital Ruble by the Bank of Russia.

Preparing for a world of CBDCs Prepare consumer-facing wallets. Build tech to custody CBDC keys. Maintain trusted security infrastructure. Develop accompanying KYC and AML tools for digital payments transactions. Develop new customer services and products.