This chapter looks at the emergence of digital money and the evolution of payments systems that predominantly use commercial bank digital money (CBDM). The vast bulk of money in most economic systems is held in the commercial bank system as digital money held in transaction/current and savings accounts, held by citizens and businesses. For example, the Federal Reserve system in the US publishes their monthly “Money Stock Measures H.6” report. According to the August 2023 report, cash in circulation (CIC) was some US$2.3 trillion; M1, which comprises liquid banking assets plus CIC was US$18.3 trillion, and commercial bank reserves at the Fed was US$3.2 trillion, which means liquid digital money is over nine times the size of cash in circulation. There are also many other less liquid assets, such as money market funds and long-term loans held in digital money, that dwarf cash usage.
Chapter 1 tracked the decline of cash in the 21st Century, particularly for making payments, and the rise of alternative mechanisms such as fast payment systems (FPS). This chapter tracks the
