Money is a representation of wealth. A US dollar represents a fraction of the total wealth of the country. This definition underlies any discussion of currency, whether physical cash or digital tokens. Gold and silver have traditionally been used to represent a store of value that is intrinsic to a coin minted from either. Until 1972, the US dollar was backed by gold; paper dollars could be exchanged for physical gold. After 1972, that exchange ended, making the dollar a fiat currency, backed only by “the full faith and credit” of the US government.

The growing ubiquity of the Internet and the creation of strong encryption algorithms led to the idea of a blockchain, a secure and permanent record of transactions involving digital tokens. These tokens are not tied to any physical asset, but they have characteristics similar to cash. This led to their being exchangeable with national currencies and usable in financial transactions, some of which are considered illicit. Government leaders became concerned about competition from uncontrolled nongovernmental currencies. They proposed national, or central bank digital currencies (CBDCs), that would replace physical cash and other digital currencies, arguing that most transactions in modern economies are already digital; the new currencies would be implemented in a more modern and efficient way.

The article does a good job of describing this background and gives plenty of details, with references, on what has gone on over the years since digital tokens began to be used as currency. One idea that perhaps needs more discussion is that CBDCs replacing cash gives governments opportunity for abuse. For example, the Chinese government uses a “social credit system,” which restricts the activities of people who are out of favor. By integrating such a system with its digital currency, a government could deprive an individual of the freedom to use financial resources, creating a considerable degree of control. Another area to explore is whether the rise of cryptocurrencies reflects a reduced faith in national fiat currencies.