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The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance Hardcover – September 21, 2021

by Eswar S. Prasad (Author)
4.4 4.4 out of 5 stars 335 ratings
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An Economist Best Book of the Year

A Financial Times Best Book of the Year

A Foreign Affairs Best Book of the Year

A ProMarket Best Political Economy Book of the Year

One of The Week’s Ten Best Business Books of the Year

A cutting-edge look at how accelerating financial change, from the end of cash to the rise of cryptocurrencies, will transform economies for better and worse.

We think we’ve seen financial innovation. We bank from laptops and buy coffee with the wave of a phone. But these are minor miracles compared with the dizzying experiments now underway around the globe, as businesses and governments alike embrace the possibilities of new financial technologies. As Eswar Prasad explains, the world of finance is at the threshold of major disruption that will affect corporations, bankers, states, and indeed all of us. The transformation of money will fundamentally rewrite how ordinary people live.

Above all, Prasad foresees the end of physical cash. The driving force won’t be phones or credit cards but rather central banks, spurred by the emergence of cryptocurrencies to develop their own, more stable digital currencies. Meanwhile, cryptocurrencies themselves will evolve unpredictably as global corporations like Meta and Amazon join the game. The changes will be accompanied by snowballing innovations that are reshaping finance and have already begun to revolutionize how we invest, trade, insure, and manage risk.

Prasad shows how these and other changes will redefine the very concept of money, unbundling its traditional functions as a unit of account, medium of exchange, and store of value. The promise lies in greater efficiency and flexibility, increased sensitivity to the needs of diverse consumers, and improved market access for the unbanked. The risk is instability, lack of accountability, and erosion of privacy. A lucid, visionary work, The Future of Money shows how to maximize the best and guard against the worst of what is to come.

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  1. Print length
    496 pages
  2. Language
    English
  3. Publisher
    Belknap Press: An Imprint of Harvard University Press
  4. Publication date
    September 21, 2021
  5. Dimensions
    6.12 x 1.6 x 9.25 inches
  6. ISBN-10
    0674258444
  7. ISBN-13
    978-0674258440
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From the Publisher

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Best book of the year notations for Economist and Financial Times

Editorial Reviews

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“A strength of [Prasad’s] analysis is his mastery of both technical details and big-picture trade-offs…As it loses physical form, money’s meaning will become ever harder to grasp. This book explores the economic and social effects of that upheaval, giving shape to this most abstract of concepts.”―The Economist

“An in-depth look at how our wallets are set to evolve.”―Enda Curran, Bloomberg

“Prasad aims to pull together some of the threads about bitcoin and such like to set out a big picture on money…Prasad’s helpful discussion of the pressures on, and options available to, central banks was illuminating. I found his framing of the ways in which these new technologies simultaneously make regulation both easier and more difficult interesting.”―David Birch, Financial World

“Digital technologies are also transforming the world of finance. Prasad provides an invaluable overview of what this might mean: physical money will disappear; central bank money will compete with the new private versions; financial intermediation will be transformed; and new opportunities will open to the world’s population.”―Martin Wolf, Financial Times

“Demystifies the esoteric world of cryptocurrencies…Prasad’s analysis is the best single point of entry for those interested in the nitty-gritty of digital finance.”―Barry Eichengreen, Foreign Affairs

“A road map for money managers, market strategists, and others seeking to understand this new world.”―Reshma Kapadia, Barron’s

“As money has become free to move around the world, Prasad probes how digital innovation is reshaping it as both a tool and a concept.”―Paola Subacchi, Nature

“An ambitious book, covering the diverse landscape of digital money, and one that will remain relevant for years to come.”―Daniel Kuhn, CoinDesk

“In The Future of Money Eswar Prasad explains how technology will impact everything financial, from what money will look like to peer-to-peer lending, central banking, and cross-border capital flows. In lucid prose, Prasad explains to the intelligent layperson how exactly Bitcoin works and whether a digital renminbi could challenge the US dollar. If you are looking for an insightful and comprehensive guide to how monetary finance might change, look no further.”―Raghuram G. Rajan, Professor of Finance at the University of Chicago Booth School of Business, former Chief Economist of the International Monetary Fund, and former Governor of the Reserve Bank of India

“Money shapes economies, economies shape nations, nations shape history. It follows that the future of money is profoundly important. Here is a definitive report on where we are and where we are going.”―Lawrence H. Summers, Charles W. Eliot Professor and President Emeritus, Harvard University

“Prasad’s book is the best on the topic so far. In particular, it provides the most complete description of issues and factors that will shape the future of money. Everyone with limited time wanting to have a deeper understanding of money in the 21st century, should read this book.”―Daniel Heller, Central Banking

“Drawing on his extensive policymaking experience and insights as one of the leading macroeconomists, Eswar Prasad in The Future of Money provides a comprehensive account of the economic, social, and technological issues that will determine how we save, invest, buy, and sell in the future.”―Mark Carney, former Governor of the Bank of England

“Comprehensive…and a vital handbook for anyone looking to understand how finance is changing.”―Gavin Jackson, Financial Times

“In The Future of Money Eswar Prasad has produced a single-volume masterpiece with all one needs to know about an amazing upcoming turning point in monetary policy. He shows that if we follow his sensible advice and heed his warnings of over-regulation and fear, Central Bank Digital Currency will be a genuine help to the poor and a gateway to global stability. Encyclopedic and carefully researched, the book is packed with many valuable, easy-to-understand examples.”―John B. Taylor, Stanford University

“A sober-minded and informative take on an overheated topic.”―Publishers Weekly

“A sweeping survey of fintech, crypto assets, and central bank digital currencies (CBDCs).”―John Detrixhe, Quartz

“Very interesting and very worthwhile…I’ll be referencing The Future of Money for a long time.”―John Tamny, Forbes

“For anyone who really wants to understand how [Bitcoin] works in all its technical splendor, there is no better introduction.”―Benjamin J. Cohen, Project Syndicate

“An impressive overview of the many changes digital technologies have already wrought…A sweeping overview of developments in payments, from the specifics of Ant Group’s business to the e-krona project and Venezuela’s Petro…An engaging read.”―Jon Frost, Finance and Development

“An eminently readable work that is accessible and smooth. From banks to cryptocurrencies to fintech, he gives a detailed crash course on the present and lays out breadcrumbs to an uncertain future. As Prasad says, only one thing is for sure, cash is on its way out. What the future holds remains to be seen.”―The Week (India)

“The book makes a significant contribution. It addresses many wider issues associated with digital currencies and digital finance. These issues include the potential effects on financial stability, the monetary transmission system, domestic and international payment systems, financial inclusion and inequality. It is impressive that so many topics are covered in an accessible manner…[An] excellent book.”―Carlo Cocuzzo and Ian Bright, Society of Professional Economists

“Covers everything about digital money, finance, and fintech that anyone would need or want to know.”―Alex Lo, South China Morning Post

“A wonderful introduction to, and reference for, the fast-changing world of electronic assets…Fun to read, provides lots of fascinating material for money and banking classes…The book is solid, but the future of privately provided e-money is not.”―Robert P. Flood, Journal of Economic Literature

“An interesting and insightful exposition on the shifting landscape from traditional paper notes to digital currencies…The Future of Money provides readers with a window into some of the opportunities and challenges that lie ahead for the financial sector.”―Ronald L. Moy, Enterprising Investor

“While written from the perspective of a central bank economist, the book is highly readable and accessible to those without formal training in monetary economics and policy. As it describes projects likely to become reality over the next five to ten years, The Future of Money is relevant for social science scholars interested in technology, digitalization, markets, and organizations.”―Alex Preda, Administrative Science Quarterly

“This book offers valuable insights to understand the impact of digital currencies on monetary policy, commercial banks and financial stability.”―Journal of Evolutionary Economics

About the Author

Eswar S. Prasad is the Tolani Senior Professor of Trade Policy and Professor of Economics at Cornell University. He is also a Senior Fellow at the Brookings Institution, where he holds the New Century Chair in International Economics, and a research associate at the National Bureau of Economic Research. He is the author of Gaining Currency: The Rise of the Renminbi and The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance.

Product details

  • Publisher ‏ : ‎ Belknap Press: An Imprint of Harvard University Press (September 21, 2021)
  • Language ‏ : ‎ English
  • Hardcover ‏ : ‎ 496 pages
  • ISBN-10 ‏ : ‎ 0674258444
  • ISBN-13 ‏ : ‎ 978-0674258440
  • Item Weight ‏ : ‎ 2.03 pounds
  • Dimensions ‏ : ‎ 6.12 x 1.6 x 9.25 inches
  • Customer Reviews:
    4.4 4.4 out of 5 stars 335 ratings

About the author

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Eswar S. Prasad

Eswar S. Prasad

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Eswar Prasad is the Tolani Senior Professor of Trade Policy at Cornell University. He is also a Senior Fellow at the Brookings Institution, where he holds the New Century Chair in International Economics, and a Research Associate at the National Bureau of Economic Research. He was previously chief of the Financial Studies Division in the International Monetary Fund’s Research Department and, before that, was the head of the IMF’s China Division.

Prasad has testified before various U.S. Congressional committees, including the Senate Finance Committee and House Committee on Financial Services. He was a member of the analytical team that drafted the 2008 report of the High-Level Committee on Financial Sector Reforms set up by the Government of India. He serves on an Advisory Committee to India’s Finance Minister and is the Lead Academic for the DFID-LSE International Growth Center’s India Growth Research Program. He is the creator of the Brookings-Financial Times index of world economic activity (TIGER: Tracking Indices for the Global Economic Recovery; www.ft.com/tiger). His op-ed articles have appeared in the Financial Times, Harvard Business Review, International Herald Tribune, New York Times, Wall Street Journal, Washington Post, and numerous other newspapers.

Eswar Prasad’s previous book, Emerging Markets: Resilience and Growth Amid Global Turmoil (with M. Ayhan Kose; Brookings Institution Press), was published in December 2010. His extensive publication record includes articles in top academic journals as well as numerous collected volumes. He has co-authored and edited numerous books and monographs, including on financial regulation and on China and India. His research interests include the macroeconomics of financial globalization; financial regulation, monetary policy frameworks and exchange rate policies in emerging markets; and the Chinese and Indian economies.

Customer reviews

4.4 out of 5 stars
4.4 out of 5
335 global ratings

Top reviews from the United States

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Shankar Saikia
5.0 out of 5 stars Excellent book on concept/history/future of money, great writing
Reviewed in the United States on October 4, 2021
Verified Purchase
I LOVED reading this book and learned/re-learned and enhanced my knowledge of money. I read the book diligently, slowly and at times re-read chapters (e.g., the first one on Bitcoin) to try my best to absorb as much as I could.
I have read a few books on the topic of money, and this one is among the best. I also loved “The Ascent of Money” by Niall Ferguson, “Naked Money” by Charles Wheelan … those are definitely equally good.
What sets this book apart is that it starts with great explanations of the definition of money, the different types of money (eg. “outside money”, “inside money” etc), then explains Bitcoin, the current crypto craze, central bank digital currencies (CBDC), current trends, central bank functions, reserve currencies and a lot more.
Among the many great things about this book is how each chapter is a great buildup to the next one, and the author explains concepts very clearly with fantastic examples. The chapter on Bitcoin was one of the best introductions to the topic.
The author gives us a beautiful review of the evolution of money, from the first central bank created in Sweden in the 1600s, to modern types of payment means like PayPal, Venmo, Alipay etc all the way to CBDCs.
The book is extremely readable and at approximately 360 pages a very palatable length :) …
I cannot find a flaw in it :)
Anyone interested in an excellent review of the concept of money, the current trends and likely future direction should read this book. Kudos and thanks to Professor Prasad …
44 people found this helpful
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A. Menon
4.0 out of 5 stars A summary view of the state of monetary systems and current financial innovations
Reviewed in the United States on December 17, 2021
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The Future of Money is an overview of the current state of monetary systems and a review of how new financial technologies are disrupting as well as increasing the chances of changing current monetary architectures. The author has been a popular economics writer for the last decade with a focus on subjects like the persistence of dollar dominance. This latest book largely serves as an overview of what's going on, how are the systems we use structured and what are their ultimate uses. It is a good book to summarize the high level state of knowledge for monetary architectures.

The author begins with a discussion of money and finance and its use in facilitating economic transactions and the medium for savings and investment to be tabulated. I would think most of the readership is already aware of the dimensions of use of money so, though useful, there is probably redundancy of knowledge in the first section of the book. The author then moves into the economists view of bitcoin and its failures as a unit of account or a medium of exchange and puts it in the speculative asset camp. The author spends time walking through the architecture of Bitcoin and how its original creation was motivated by central bank money creation to combat the financial crisis. The author discusses how decentralized ledgers can be maintained with security and discuss the hash functions and Merkle trees that define how Bitcoin maintains its ledger. The author also discusses Ethereum networks and how they use proof of stake rather than proof of work to power the network. The author uses the chapter on decentralized tokens to motivate how computer science and cryptography has been used to construct solutions to decentralized coordination. These technical solutions are ingenious but ultimately all fail to satisfy the needs of a monetary system due to stability of the unit of account as well has high transaction volumes that could represent a real proportion of commercial transactions.

The author then moves on to central bank initiatives to introduce CBDC (central bank digital currencies). The author introduces concepts like potentially allow individuals to face the central bank bypassing the commercial banking system. Also brought up are smart contract usage to better facilitate cross border financial transactions. The author highlights how many countries are already going cashless, with some e-monies being government while others being a function of the private sector innovating (Alipay). The author spends time discussing various sovereign backed initiatives including Venezuela to highlight that digital currency is no panacea and always requires trust in the issuing entities that are independent of the technology behind it. Thus fiscal responsibility and central bank independence are not unnecessary in a digital currency world. The author also discusses how the efficiency gains from digital currency introduction should not be overestimated as they might lower inefficiency of certain phenomenon but they don't represent a massive regime shift on the nature of money.

The author then goes and gives a summary of the where monetary systems stand. What needs to be improved, where technology can help but also the limitations of technological solutions. The author highlights the cost benefit on anonymity in financial transactions and how decentralized finance doesn't quite achieve that and central bank digital currencies make transactions less anonymous. So the transition to digital monies should have more feedback from society so that there is a more democratic inclusion in the changing nature of finance and the monetary system.
15 people found this helpful
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TR
5.0 out of 5 stars Excellent Service
Reviewed in the United States on March 31, 2024
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Product as described. Timely delivery. Excellent packaging.
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Patricia C
5.0 out of 5 stars Excellent book on the future of monetary transactions
Reviewed in the United States on October 27, 2021
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I just finished reading the Kindle version of this book, and found it to be exceptionally clear, well-written, and extremely thorough in the way it describes the many different methods that countries are exploring as they attempt to deal with digital currencies. The author exhibits an impressive knowledge of a wide variety of methods being used to tackle future currency transactions, and discusses the implications of these methods on the financial establishment. He also discusses, in depth, the pros and cons of each country’s approach in a very clear and unbiased way.
7 people found this helpful
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Bob Babinsack
5.0 out of 5 stars The Future of Money
Reviewed in the United States on March 6, 2022
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This book came "highly recommended" as the cliche goes by Adam Tooze, history economist with an ever growing reputation. (Check out his Charbook on substack)

The promise of finally finding all the nuances of the entire genre of cryptocurrencies met the actuality of learning, if not all, very much all the intricacies of modern macro financing, currency exchange, digital currency, emerging market economies, established currency and what the heck crypto's can do for me.

While I am no expert, I had my presumptions, and while I had no reason to cling to the presumptions, reading this volume suggests to me that I am on the right track. I wouldn't want to reduced the entire work with a sentence that exposes my on going ignorance, but I will write this -- the future of currency is just as volatile as the daily seesaw of headlines about the value of currency. Until it isn't. But, yes, we are in an epoch of financial change, but the author suggests that it might not be so different in certain respects(read Dollar dominated), all the while being completely changed in others(read less dollars)
8 people found this helpful
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Rishabh Aggarwal
3.0 out of 5 stars Not sure about content, but the printing is so bad
Reviewed in the United States on January 9, 2024
It is more than $20, but feels like a Mass Paperback. Bad quality paper and bad quality print.
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Carlos Carreno
4.0 out of 5 stars Deep and comprehensive
Reviewed in the United States on November 3, 2021
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Entrega oportuna, en sus primeros capítulos muestra un acercamiento profundo y diferente al tema, muy interesante
One person found this helpful
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Cato The Eldest
5.0 out of 5 stars Great Primer
Reviewed in the United States on November 9, 2021
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This is a quasi-textbook. It's accessible and clearly written. I'm old, but I've taught investments and finance at university. This book made me realize that the unprecedentedly rapid rise of crypto, coupled with the massive fiat printing, both since 2009, had left me behind. If you want to get caught up, get a handle on the explosive changes in train (read that as a warning or a promise for the future, as you see fit) this is the book for you. Read it soon, though, because in a year, two at most, it too will be obsolete.
17 people found this helpful
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Amazon Customer
5.0 out of 5 stars Very interesting to read
Reviewed in India on October 13, 2023
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Very good book on digital finance
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Serghiou Const
5.0 out of 5 stars Authoritative, comprehensive, and balanced in its treatment
Reviewed in the United Kingdom on January 17, 2023
Verified Purchase
The book is authoritative, comprehensive, and balanced in its treatment while its writing combines unimpeded flow, wit and clarity.

If in view of the above, the reader assumes that the book is an easy read that would be wrong. The book is intrinsically, conceptually difficult, and suitable for the serious reader who, however, would be deeply rewarded.

The book deals with the transformation of currencies and finance effected by the digital revolution.

The book commences with basic concepts:

Money serves three basic functions namely as a unit of account, a medium of exchange, and a store of value. Fiat money is created by an official authority and is usually not backed by anything other than faith in the central bank or the government that stands behind it. Fiat money constitutes legal tender, which means that it must, by law, be accepted for settling any debt obligation to a private party.

The key functions of a financial system essentially comprise to providing products for saving and credit and managing risk; financial intermediation is the process of matching the funds provided by savers with the needs of borrowers.

The task of intermediating savings into investment and thus allocating this capital optimally is accomplished through a variety of financial institutions and markets which also include stock markets and bond markets.

Banks serve a crucial function by bundling short term deposits and then matching them with financing of long-term projects that increase an economy's output and employment.

Payment systems are the arteries that carry the lifeblood of finance. Payments between households and businesses and within these two groups, underpin transactions involving goods, services, and assets. Systems that efficiently transfer money across financial institutions, either within or between countries are also essential to the operation of a financial system. Payment systems ( a term that encompasses systems that enable payments to be initiated, cleared and settled ) are thus a key a key part to the financial infrastructure.

Payment systems can be classified broadly into three categories: retail, wholesale ( interbank ) and cross-border.

To improve communications related to cross-border transactions, major banks from a number of countries set up the Society of Worldwide Interbank Telecommunications ( SWIFT ) in 1973 to develop a common protocol for payment messages.

The timing of the Fintech wave might be the result of the fortuitous confluence of factors - a wave of technological advancements, including in mobile and internet - related technologies; a laxer financial regulation; and low interest rates that sparked the search of new sources of profit and lower costs in financial markets, collectively improving the execution of the basic functions of a financial system that is credit, services and insurance. The biggest impact is likely to be on payment systems.

A common theme that link new entrants in Fintech is their use of digital technologies and their largely online existence. Another theme is the use of big data ( analysis of big data obtained from different sources ), machine learning and artificial intelligence tools to automate the application, screening, and approval processes involved in the provision of credit, insurance, and other financial products.

Mobile money - One innovation that has taken root and began to modernize finance in developing countries is modest in terms of technology but transformative in its effects on people's lives -the advent of mobile-based apps designed to facilitate the use of money and banking.

While mobile money takes existing technologies and puts them to transformative uses, the latest wave of Fintech is more often characterized by new technologies some of which are in themselves transformative.
Fintech firms are making forays into areas varying from basic financial intermediation to insurance and payment systems. In each of these areas, new technologies are improving extant business models and sometimes also creating new financial products or ways of doing business.

Bitcoin - Cryptocurrencies such as Bitcoin are digital currencies that are not backed by any government authority ( nor, in most cases by any financial or tangible assets either ) and whose building blocks include some cryptographic tools. Bitcoin and the innovative technology underlying it, referred to as the blockchain, set off a mania for cryptocurrencies. Whatever Bitcoin's ultimate destiny might be, it is the blockchain technology that is likely to become its enduring legacy.

Before discussing how Bitcoin works, it is worth reviewing the key characteristics of an efficient payment system. It must provide a way of identifying and connecting the parties to a transaction; facilitating and validating the actual transaction; making sure the transaction is easily verifiable and also immutable ( cannot be undone or changed later ); and precluding double-spending of the same unit of money. Each of these steps is, on its own, a big technical challenge. Yet, Bitcoin solves them all.

Public and private digital keys constitute the essential elements of anonymous digital payment systems. A digital coin is stamped with the public key of its owner; it would also be associated with the owner's private key to ensure that it has only one owner. Thus each digital coin is identified by two attributes - a public key and the corresponding private key. To transfer the coin, the owner signs the coin ( digitally ) using their private key together with the public key of the next owner: the person to whom they are making the payment. Anyone can ( electronically ) check the public keys of both sender and recipient to verify the chain of ownership.

Sending information related to a massive volume of transactions across computer networks would, however, be slow and cumbersome.

Two mathematical concepts help transform this into a manageable problem: the first element is a cryptographic hash function. This is a mathematical function that takes a string comprising letters and numerals ( which could be a message, a number, or a combination) of arbitrary size and compresses it into another string of letters and numerals of fixed length, called a hash. The function is deterministic, meaning that it will always render the same output when the input is the same. But it is nearly impossible to back out the input from the output. For the purpose of a cryptocurrency, a hash serves as a digital fingerprint of a transaction.

The second element is a Merkle tree which is the case of having to compress information about a set of financial transactions. The corresponding Merkle tree would be built by taking hashes of individual transactions ( each of which is a 'leaf' on the tree ) and then repeatedly applying the hash function to pairs of hashes in a specific progression until there is only one hash. This final output, called the root hash or Merkle root, produces a unique digital fingerprint of the entire set of transactions.

To sum up, the blockchain is a publicly shared ledger of transactions maintained on a decentralized network of computer nodes. Blocks of validated transactions are added to the blockchain through computations performed by individual miners. The consensus mechanism for validated transactions is, thus, decentralized and the blockchain is buttressed by the transparency and the decentralized structure of the network which makes it largely tamperproof. Bitcoin's trustworthiness is aided by the ease of verification of transactions. The system is designed to protect the integrity of the currency without the need of transactions to pass through banks and other third party intermediaries.

I shall conclude the review with the case for issuing Central Bank Digital Currencies ( CBDCs ).

A CBDC has a number of possible benefits, some of which depend on its particular design. First, a CBDC provides greater transactional efficiency than cash, making payments cheaper and quicker. Second, it can serve as a backstop to private sector managed payment systems, avoiding a breakdown of the payment infrastructure during a crisis of confidence. Third, it helps increase financial inclusion, providing low-income households and those in sparsely populated areas easy access to digital payment as well as other financial products and services. Fourth, it has the potential to ease the zero lower bound constraint on monetary policy and also make easier to engineer helicopter drops of central bank money ( without relying won fiscal transfers ). Fifth, it brings informal economic activity out of the shadows, thereby broadening the tax base and reducing tax evasion, which adds up to higher tax revenues for the government. Sixth, its traceability makes it harder to use CBDC for illicit purposes such as laundering of money and financial terrorism.
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Ryan Mitchell
5.0 out of 5 stars Excellent
Reviewed in Sweden on June 10, 2022
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A must read for anyone looking to significantly increase their understanding of money and crypto
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SilvioM
5.0 out of 5 stars A journey on the various forms of digital money already available and next to come
Reviewed in Italy on April 19, 2022
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A great book on what is the future of money: digital currencies like e-dolla,r e-euro and e-yuan. The matter made easy for non-economist. And a great journey in the realms of block-chain and DeFi (Decentralised Finance). Not being and economist I had the chance to get all of these subjects illustrated along with what matter to any of us when challenged by the the question : And so what?
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matthias osterhorn
5.0 out of 5 stars Das wir die Bibel für die Digitalisierung der Finanzwelt in den nächsten 5 Jahren sein.
Reviewed in Germany on December 13, 2021
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Das Buch gibt eine sehr realitätsnahmen, beispielhaften Überblick, wie sich die Finanz- und Geld- Welt in den nächsten 5 Jahren ändern wird. Viele der beschriebenen Sachen sehen wir schon in den Anfängen und es ist durchaus realistisch, gerade unter dem Aspekt der momentan sehr stark anziehenden Digitalisierung, das all dies auch so umgesetzt wird. Ein sehr gutes Buch oder mehr eine Richtlinie für die kommenden 5 Jahre.
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