Money has been a fundamental part of human society for centuries. It has come a long way from its early beginnings as a medium of exchange in the form of shells, stones, and other items to the more modern paper money and electronic payments we use today. . Its evolution has been driven by the need to facilitate trade and commerce, and to provide a reliable store of value. Throughout history, money has taken many forms, from the stone money of Yap to paper money and electronic payments, and now to the emergence of Central Bank Digital Currencies (CBDCs). Over time, however, the concept of money has evolved, and with it, so has the way we use it.

One of the most fascinating examples of the evolution of money can be found in the Yap Islands group in Micronesia, where stone disks called “Rai” are used as a form of currency. These large stone disks, sometimes measuring up to four meters, have a hole in the middle that was used for carrying them, and they are still used as a trading currency today. It’s a testament to the versatility of money and the ingenuity of people in finding new ways to exchange value. Shells, beads, and other items have also been used as currency in ancient civilizations, and salt and animal fur were used in some regions.

Money has three essential functions: medium of exchange, store of value, and accounting unit. The concept of money has evolved significantly over time, and different societies have used various items as currency. As mentioned, In other parts of the world, shells, beads, and other items were used as a form of currency in ancient civilizations.

Cowrie shells, for example, were used as money in China over 3,000 years ago and remained legal tender in some African countries until the mid-19th century. Paper money was much easier to carry and use than coins, and it quickly became the dominant form of cash in advanced civilisations. In Europe, silver and gold coins were commonly used for centuries, and even salt and animal fur were used as a means of payment in some regions, hence the term “salary”. In other areas, animal fur was used as currency. Deer pelts were known as “bucks”, which is still used to mean money in some regions.

As trade and commerce grew, the need for more convenient and standardized currency became evident, leading to the development of paper money in China and Europe. Later, electronic payments emerged, with the introduction of the first credit card by Diners Club in the US in 1950. Today, electronic payment methods are indispensable in a modern economy, but physical cash still plays a significant role in micropayments and, unfortunately, the payment of bribes to government officials and businesses. In the western world an entire industry has sprung up to influence decision making on all levels. These are the so-called lobbyist which are always in need for large caches of cash. As recent history has shown not even the senior member of the European Union are immune from this temptation.

While payment options provided by private companies went digital, fiat money, cash issued by a central bank under a government mandate, has not evolved since the introduction of bank notes. Sure, the printing technology and counterfeiting prevention techniques may have improved, but physical central bank money (cash) that is used by the public did not change.

Despite the convenience of electronic payments, physical cash has remained an important part of our lives. Cash is still widely used for small transactions, commonly known as “micropayments” and it is often the preferred form of payment for small payments and those who are unbanked or do not have the latest smartphone edition.

With the rise of Central Bank Digital Currencies (CBDCs), money is undergoing yet another transformation. CBDCs are digital versions of fiat money issued and backed by a central bank. There are two forms of CBDC: Retail CBDC and Wholesale CBDC. Retail CBDC is designed for micro payments and as a cash replacement to provide the benefits of cash, such as anonymity and security, while also offering the convenience of electronic payments. Wholesale CBDC are designed for large commercial payments. Together the CBDC infrastructure can offer both the benefits of cash and the convenience of electronic payments. It all depends on the initial design decisions made by a country’s central bank when exploring and deploying their very own CBDC infrastructure.

CBDCs can provide both the benefits of cash and the convenience of electronic payments, depending on the design decisions made by a country’s central bank. Some countries have already launched their own CBDC, while others are exploring the possibility, including the US, Russia, Iran, Ukraine, Japan, and Brazil.

CBDC implemented globally could revolutionize the way we use and deploy money. CBDC can make payments faster, cheaper, and more secure and, again depending on the central bank’s design decisions, could help to promote financial inclusion if so desired. CBDC can also offer central banks better control over their money supply and prevent financial instability. However, there are also concerns about their impact on privacy and the future of the banking system at large, which could become obsolete in an instance.

As central banks continue to explore the possibilities of CBDCs, it is crucial to balance the potential benefits with the risk of abuse by unscrupulous governments or the global deep state. The history of money has been marked by various changes, and the emergence of CBDCs is yet another transformation. It clearly demonstrates the evolution of money is far from over. It will be interesting to see how money continues to evolve and adapt to the changing needs of society in the years to come.

Central banks as the “product owner” must balance the potential benefits of CBDCs with the risks of abuse. As CBDCs continue to evolve and gain prominence, they have the potential to shape the future of money and banking, and it is important to consider their impact carefully.