Since mankind created units of credit in physical form - currency, its progress can be traced one to one with progress graph of mankind. Money started few thousand years ago as a statement of credit in a dematerialized form and is today come a full circle back to dematerialized form Tran sforming itself from Anatolian obsidian to Roman Moneta, Greek Drachma and the first ever punched metal coins minted in India and China in 7th century BC. Today commonest currency is that which is nothing but dematerialized promissory notes prevailing as credit cards, or mobile & electronic money. Though currency notes technically do not fulfill the conditions laid out for promissory notes under the Negotiable Instruments Act and are governed by a separate Indian Currency Act, yet in traits, banknotes are promissory notes; albeit they come with indefinite maturity period. A currency note is a bearer instrument which means that he who physically possesses it is deemed as the owner, until proven otherwise. Bearer notes were important to free trade which was hardwired to reputation. Bearer money indeed became an indicator of creditworthiness. As humanity progressed economists realized that a part of the money was always at rest, therefore bearer notes represent only a part of the economy.
So my seemingly bizzare question, that forms the foundation of this article is - do we really need bearer notes at all anymore in futute?
Currencies like all other credit instruments are valued by the creditworthiness of the issuer, since currencies are a promise of the issuer to pay the holder specified amount on a specified date or on demand.
Soon enough there will be nations that will provide for electronic banknotes. Such notes will come with printed electronics which will enable among other things establish, register and log the holder of such banknotes.
Everytime such money exchanges owner, the money will electronically register the transaction in itself. The memory could be one time write-only. The logs could be everynow and then transmitted to a depository whenever there is an automated opportunity and get replenished in its memory.
Once the holder is physically identified by the banknotes, they will cease to be bearer instruments. Indeed, existing technologies are adequate enough to make this happen. Once such notes are made available money shall stop being a mode of bribery, corruption or even hoarding untaxed money. Presence of logs within the cash will make cash completely transparent and traceable.
There will be no need to count such notes, as the quantity will be known by proximity to sensors.
Some might ask if all such banknotes are electronic, how is it different from electronic bit money? Why then have banknotes at all? Anyway states are trying to go cashless using electronic transfers of various kinds. Well the answer is in the use of banknotes as an offline currency. In cases where connectivity is not available temporarily for electronic transfers such electronic banknotes will ensure that the economy keeps on going seamlessly.
So, be ready for a regime where there just might not be black money the way we perceive it right now. Probably there will be other forms of keeping illegal valuables, but both land and cash might not be those means.
Soon one will be able to keep at home blank currency - pretty much like blank cheques and electronically activate the currency, taking it live. Indeed, such blank notes will replace cheques and demand drafts. Thereby purging the demarcation between currency and cheques or other means of negotiation.
And I hope India could lead the world in large scale implementation of such advanced technologies.
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