Currency News: India’s Void Banknotes Begins To Hurt Economy & Sweden And Singapore Explore Digital Currencies
Currency News
India’s Void Banknotes Begins To Take A Toll on The Population
Over the past week, India has begun to feel a huge currency shock as the prime minister had voided India’s largest two bank notes, the 500 and 1000 rupees, which had made up 86% of the money circulation. Prime Minister Narendra Modi had explained that this was a necessary step in order to more effectively crack-down on the underground economy (black market) in India. Though the Ministry of Finance has reassured the public that a full exchange of notes will be completed over the next two-weeks, at the moment, this has put a major pressure on the banking system as they attempt to cope with a loss physical money. The Central Bank of India has as well tried to reassure the public so as not to have a run on the banks, or ‘bank run’, when the public all at once rushes to the bank to demand their money from savings.
“The first few days are going to be a period of inconvenience, but long-term advantages of this are to the overall economy,” Finance Minister Arun Jaitley said. “There is no mismanagement at banks. Had that been the case then not so many people would have been serviced.” Though long run advantages may or may not occur, at the moment small business, who mainly deal with large amounts of cash, are being squeezed the most from the population. People are as well spending less smaller bills, as they believe those notes to become scarce in the near future, further pressuring small businesses. Furthermore, many analysts suggest that this can caused India grow 1.2% less than expectations, which are at about 7% economic growth.
Singapore and Sweden’s Governments Explore The Possibilities of Introducing Electronic Money
Digital currencies are starting to become a reality as Singapore and Sweden both are planning on adopting forms of digital currencies. The central bank in Singapore, or the Monetary Authority of Singapore, has begun to perform backtests on its own digital currency, using a trial of a blockchain-driven system for interbank payments. The digital currency is designed to lower transactions costs for the masses as well as increase circulation and efficiency amongst money payments.
“Today, banks have to go through correspondent banks to intermediate these payments. It takes time and adds to cost,”Managing Director Ravi Menon said, “This project marks the first step in MAS’s exploration of ways to harness the potential of central bank-issued digital currency.”
(Source: Scania.com)
In addition to Singapore, Sweden’s central bank has begun seriously discussing whether to introduce digital currency as there is a decline in the use of physical coins and notes. If done, the digital currency would issued directly to private individuals as a supplementation for their old notes, similar to how central banks issue currencies to commercial banks.
“The less those of us living in Sweden use bank notes and coins, the clearer it becomes that the Riksbank needs to investigate whether we should issue electronic money as a complement to the money we have today,” Ms. Skingsley the Swedish Riksbank Deputy Governor said. Though there are still many questions looming, such as how repercussions this will have on the stability of commercial banks, it seems that Sweden is moving in the direction to be the first of the Nordic states to introduce electronic money.
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