Is cash still king?

Here’s the answer to this week’s reader question about how cash will continue to work in Canada.

Will cash or fiat currency continue to exist? Will “cash is king” continue to be true?

–Stephen

Defining cash and fiat currency

What is happening now is that cash is being replaced by digital means of payments; the way we use currency in payments is being replaced. But that does not mean that fiat currency itself is being replaced.

Fiat currency is a broader term that relates to money creation or the form in which money exists in the economy. Cash is not the same: it is just one way in which that money exists.

Fiat currency has three roles:

1. As a unit of account;
2. a store of value;
3. and a medium of exchange.

By “unit of account,” I mean that prices are quoted in dollars, so you can measure how much something costs. “Store of value” means that if I give you $1 in cash today, you can use this dollar to buy something tomorrow. And “medium of exchange” means that no matter who I’m transacting with, if I offer you $1 in cash, you will be willing to accept it, no questions asked.

It’s called fiat currency because it’s backed by trust in the government, not by any physical commodity like gold.

The limits of crypto

So far, in the U.S. and Canada for example, you cannot use cryptocurrencies to buy most retail goods and services—they are used in a completely different ecosystem. People are getting interested in cryptocurrency because of the technology that is backing it. It’s decentralized; it’s supposed to respect your privacy more than central banks or credit cards. But it’s also prone to volatility, and it can lose value very quickly.

This brings us back to what makes fiat currency a reliable form of payment: People are willing to accept it—no questions asked, and it doesn’t lose value over time except through inflation. That is why I personally do not see cryptocurrencies replacing fiat currencies. We will continue to see both these systems existing in parallel, but so far I do not see a mechanism through which the two of them can be substitutes.

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Is cash still king?

In Canada in 2025, about 20% of in-person consumer transactions were in cash. Of course, this number drops for online transactions. I don’t think there has been any research on whether the increasing incidence of fraud in digital transactions is inducing people to use more cash for person-to-person purchases, but I wouldn’t be surprised, especially for lower-income households.

Central banks and policymakers, such as the Bank of Canada and different levels of government, are thinking about how to make digital transaction systems more resilient to incidents of fraud or other threats.

For example, if there is a cyberattack or other systemic shock, instead of having one network, you should have two.

This is not to say that cash is completely safe. Cash can be stolen, and counterfeiting is an issue that can affect cash.

I do see the share of cash declining over time in Canada. It will really depend on where the demand for cash is coming from—maybe there’ll be more young people using digital payments, and older people will continue to use cash.

Cash is probably not going away completely, but the means of payment is going to be more and more digital, and I will not be surprised if in the next few years we have a system where the cost of making and accepting digital payments is less than the cost of accepting cash.

Read more from this issue of The Get:

1. Should you ask Meta’s Muse to help manage your money?
2. Where are the fallback and bridge jobs in Canada?!
3. Money coach Gina Judge on how to conquer a scarcity mindset
4. The real costs of daylight saving time for Canadians