When people hear the word cryptocurrency today, many imagine something new, complicated and untested. Something that is not backed by a large bank, a central institution or a state that would inspire trust at first sight. That is exactly why part of the public still avoids cryptocurrencies. They see digital currency as too abstract, intangible and risky.

Yet when we look at our everyday life, we find that we have been using digital money for a long time. Our salaries arrive in our accounts, standing orders are sent automatically, and rent, utilities and insurance are debited without us physically holding a banknote in our hands. In shops, we often do not pay with cash, but with a card, a mobile phone or a watch. And when we open a banking app, we do not see a pile of money, but only a number on a screen.

From cash to numbers in an account

Just a few decades ago, cash was a normal part of everyday life. People received their wages in envelopes, carried money in their wallets and paid for most purchases with banknotes and coins. Money was something physical. Something a person could hold in their hand, keep at home or hand over to another person.

Gradually, however, the world changed. Bank accounts became a normal part of life, payment cards replaced cash and online banking changed the way we manage our finances. Today, many people hardly think about the fact that no physical handover of money takes place when they pay by card. It is only a digital record in the banking system.

The Czech National Bank currently operates the CERTIS interbank system, through which instant payments also function in the Czech Republic. They make it possible to transfer money in Czech crowns between clients of Czech banks within a few seconds, 24 hours a day, 7 days a week. What would have seemed almost like a scene from an American film thirty years ago is now a normal part of our financial life.

Digital payments are nothing new

When we watched American films in the 1990s, we often saw a world that seemed technologically far ahead of us. Fast bank transfers, card payments, electronic systems and instant transaction verification looked like something incredible. Today, it is an everyday reality for most people.

We pay by card in shops, make transfers through online banking, and use Apple Pay, Google Pay or smartwatches. We often do not even take the physical payment card out of our wallet. It is enough to hold a phone near the terminal and the payment is completed within a few seconds.

In its 2024 study of payment behaviour in the euro area, the European Central Bank states that 55% of consumers preferred cards and other cashless methods when paying in shops, while 22% of people preferred cash. At the same time, 62% of consumers considered the option of paying in cash important or very important. This shows an interesting contradiction: people still want to have cash as an option, but in practice they are using digital payments more and more often.

Why people are afraid of cryptocurrencies

Fear of cryptocurrencies is understandable to some extent. Cryptocurrencies are a young phenomenon. Bitcoin was created only in 2009, and the entire market for digital assets is still developing. Compared with traditional currencies such as the US dollar, the euro or the Czech crown, this is a very short history.

Another reason is that cryptocurrencies are purely digital. A person cannot hold them in their hand like a banknote. There is no bank branch where someone can walk in and say, "Here are my bitcoins." In addition, with some cryptocurrencies there is no clear single owner or institution behind them. This can create uncertainty for an ordinary person.

European supervisory authorities have also long warned that many crypto-assets are highly risky and speculative. According to a joint warning by European supervisory authorities, consumers may lose all the money they invest in these assets. It is important to say this openly. Cryptocurrencies are not risk-free and should not be presented as a simple path to getting rich quickly.

At the same time, the mere fact that something exists only digitally does not automatically make it untrustworthy. Most of the money we use today is also digital.

Money in an account is also only an electronic record

When we have money in a bank account, we usually do not imagine that our exact banknotes are lying somewhere in a vault. We see a balance in an app and trust that we can use it. We can pay by card, send a transfer, withdraw cash or set up a standing order.

The European Central Bank distinguishes between central bank money and commercial bank money. Banknotes are the most visible form of central bank money. Money in a current account, by contrast, is a liability of a commercial bank to its client. In other words, a balance in an account is not the same as banknotes in a wallet. It is a digital record and, at the same time, a claim on the bank.

But most people do not mind this. The reason is simple: they trust the system. They trust the bank, the regulator, the central bank, the state and the rules that keep the whole system running.

The euro began as an invisible currency

An interesting example of digital money is the euro. Today, the euro is one of the most important currencies in the world and, according to the ECB, remains the second most important currency in the international monetary system after the US dollar.

Yet the euro did not begin as banknotes and coins in people's wallets. It was launched on 1 January 1999 as a currency for accounting and electronic payments. For the first three years, according to the ECB, it was an "invisible currency". Cash in the form of euro banknotes and euro coins arrived only on 1 January 2002.

This is a very important historical detail. One of the most important currencies in the world began digitally first. People did not see it in their wallets, but it existed in accounting systems, banks and electronic payments. Today, hundreds of millions of people use it as a normal and trusted currency.

So when we ask whether digital money can work, the answer is not only theoretical. It already works.

The gold standard: the moment money changed

To understand money today, we have to go back to 1971. Until then, the global monetary system was based on the Bretton Woods agreements of 1944. This system was created after the Second World War and was intended to stabilise international trade and currencies. The currencies of individual states were tied to the US dollar, and the dollar was tied to gold.

After 1958, the convertibility of the US dollar into gold operated at the rate of 35 dollars per troy ounce of gold. This meant that foreign governments and central banks could, within the system, exchange dollars for gold. The United States was therefore supposed to maintain confidence in the dollar by backing it with gold reserves.

The problem arose in the 1960s. The United States had growing expenditures, among other things because of the Vietnam War, foreign aid and domestic economic programmes. The supply of US dollars continued to grow, but US gold reserves were not growing at the same pace. Gradually, a situation emerged in which foreign holders of dollars could begin to doubt whether the United States would actually be able to exchange all dollars for gold.

On 15 August 1971, US President Richard Nixon announced a new economic policy. Part of it was the closing of the so-called gold window, meaning the end of the dollar's convertibility into gold for foreign governments. Among those involved in preparing this step at Camp David were Federal Reserve Chairman Arthur Burns, Treasury Secretary John Connally and Paul Volcker, then Under Secretary of the Treasury for International Monetary Affairs and later Chairman of the Fed.

This step marked the beginning of the end of the Bretton Woods monetary system. Money gradually moved definitively into a world in which its value is no longer directly tied to gold, but is based primarily on trust in the state, the central bank, the economy and monetary policy.

From gold-backed money to trust-based money

Ending the dollar's convertibility into gold did not mean that money ceased to have value. It meant that its value began to stand on a different foundation. On trust.

Today's dollar, euro or Czech crown are not backed by gold in the sense that we could go to a bank and demand a certain amount of gold for every banknote. Their value is based on the fact that people accept them, companies use them, the state collects taxes in them and central banks try to maintain price stability.

This is the key idea. Traditional money is based on trust. Cryptocurrencies are also based on trust. The difference lies in whom or what we trust.

With ordinary currencies, we trust the state, the central bank and the financial system. With cryptocurrencies, we trust technology, the rules of the network, mathematics, transparency and the expectation that other people will also accept the given asset.

So what is the difference? It is not that one type of money is "real" and the other is "only digital". The difference lies in the type of trust. Traditional currencies are based on institutional trust. Cryptocurrencies are based on technological and market trust.

The digital euro as a response from central banks

This is precisely why central banks themselves are now working on digital currencies. In June 2023, the European Commission presented a legislative package on the digital euro. Officially, it is intended to be a digital form of central bank money that will complement cash, not replace it.

The European Commission is led by Ursula von der Leyen, who was elected in 2024 for a second term until 2029. It is her Commission that has moved the digital euro into a concrete legislative debate.

In 2025, the European Central Bank stated that if the relevant legislation is adopted in 2026, a digital euro pilot project could begin in 2027 and the earliest possible issuance of the digital euro could come during 2029.

This shows that the issue of digital money is not only a cryptocurrency topic. It is a topic for the entire financial world. Central banks realise that if people are paying increasingly digitally, there must also be a safe digital form of public money.

Cash is not ending, but its role is changing

It is important to say that, according to official documents, the digital euro is not intended to replace cash. The European Commission and the ECB repeatedly state that the digital euro is meant to be a complement to banknotes and coins.

At the same time, however, we can see that the role of cash is changing. People use it less often than before, and governments are paying closer attention to large cash transactions. In May 2024, the Council of the EU adopted a package of anti-money laundering rules which, among other things, sets a limit of EUR 10,000 for cash payments in the EU.

This does not mean that cash will disappear tomorrow. It does mean, however, that the financial system is moving increasingly into the digital environment. And it is precisely in this environment that the debate about cryptocurrencies, the digital euro, stablecoins and the future of money is beginning to take place.

Do banks always protect us?

Many people do not trust cryptocurrencies, but they do trust banks. This is understandable. Banks are regulated institutions, they have history, branches and supervision, and deposits are insured up to a certain amount. In the Czech Republic, deposits are insured up to the equivalent of EUR 100,000 per client per bank.

This is significant protection. At the same time, however, it does not mean that the banking system is completely risk-free. History shows that banks can fail, run into problems or be rescued by the state.

In 2008, the US investment bank Lehman Brothers collapsed. Its failure became one of the symbols of the global financial crisis. The Federal Reserve notes that after the fall of Lehman Brothers came support for the insurer AIG and problems at other major institutions, such as Citigroup and Bank of America.

In the same year, on 25 September 2008, Washington Mutual Bank was closed. According to the FDIC, its assets and liabilities were transferred to JPMorgan Chase. It was one of the largest bank failures in the history of the United States.

The Czech Republic has also experienced banking crises

Nor did the Czech Republic avoid banking problems. In the 1990s, the Czech banking sector went through a difficult period. The Czech National Bank states that in the first half of 1996, the licence to operate as a bank was revoked from První slezská banka and forced administration was introduced at Ekoagrobanka, COOP banka and Podnikatelská banka.

One of the best-known cases was Investiční a poštovní banka. In June 2000, IPB entered an acute liquidity crisis which, according to the historical overview of the Czech National Bank, was caused mainly by a sudden and extensive outflow of deposits. On 16 June 2000, forced administration was imposed on IPB and its business was subsequently taken over by ČSOB.

A more recent example is Sberbank CZ. The Czech National Bank revoked its licence in 2022 after it was unable to meet its obligations to clients. The reason was a significant outflow of client deposits in response to Russia's attack on Ukraine.

Switzerland and the collapse of trust in a large bank

When Switzerland is mentioned, many people imagine stability, banking tradition and safety. Yet even there, in 2023, an event occurred that showed that even large and famous banks are not untouchable.

In March 2023, the Swiss supervisor FINMA approved the takeover of Credit Suisse by UBS. Credit Suisse was one of the best-known banking brands in the world. Nevertheless, it found itself in a situation in which a rapid solution with the support of Swiss institutions was necessary in order to preserve the stability of clients and the financial centre.

This example does not mean that banks are not important or that we should not trust them. It means only that the banking system is also based on trust. And when trust begins to disappear, problems can come very quickly.

Money is mainly belief in a functioning system

When we hold a banknote in our hand, we trust that another person will accept it. When we have money in an account, we trust that the bank records our balance correctly and allows us to use it. When we use the euro, the dollar or the crown, we trust that the state and the central bank will keep the currency functioning.

With cryptocurrencies, the principle is similar, but trust is directed elsewhere. We do not trust a single bank or state. We trust the network, the rules of the protocol, decentralisation and the fact that other people will regard the given asset as valuable.

This is why the debate about cryptocurrencies is often so emotional. It is not only about technology. It is about the question of whom we trust.

Some people say: "I trust the bank because it is regulated."

Others say: "I trust Bitcoin because its rules cannot easily be changed by a politician or a central bank."

Both views have their arguments. And both have their risks.

Cryptocurrencies are not risk-free

It would be a mistake to claim that cryptocurrencies are automatically safer than banks or traditional currencies. They are not. Their price can fluctuate significantly, some projects can fail, and users can lose money because of fraud, poor management of private keys or insufficient understanding of the technology.

Unlike a bank account, many cryptocurrencies have no deposit insurance and no central institution that would put everything right in the event of an error. For some people, this is a disadvantage. For others, it is the price of freedom and independence from intermediaries.

That is precisely why it is important to distinguish between blind faith and education. A person should not reject cryptocurrencies merely because they are digital. But they should also not trust them blindly merely because they are modern.

So what is the real difference?

The difference between traditional money and cryptocurrencies is not that one is real and the other is not. Most traditional money already exists digitally today as well.

The difference lies in the rules.

With ordinary currencies, central banks can influence the amount of money in the economy, set interest rates and respond to crises. This can be an advantage, because the system has tools to respond to economic problems. At the same time, however, it means that the value of money depends on the decisions of people and institutions.

With Bitcoin, by contrast, the supply is capped at 21 million coins. The rules are written in the protocol and changing them is not easy. That is why some people see Bitcoin as an alternative to the traditional monetary system.

Traditional money is flexible but dependent on institutions. Cryptocurrencies are programmable and often decentralised, but volatile and more demanding to understand.

Digital money is no longer the future

When we look at the world today, it is clear that digital money is not a matter of the distant future. It is the reality in which we already live.

Salaries arrive digitally. Payments leave digitally. We see savings as numbers in an app. A payment card is merely a tool for accessing a digital balance. Mobile phones and smart watches have taken this process even further.

Cryptocurrencies therefore did not create digital money from scratch. Rather, they opened a new chapter in the long development of how we pay for things. They showed that digital value can also exist outside the traditional banking system.

Conclusion

People are often afraid of cryptocurrencies because they are new, digital and not backed by a familiar institution. This fear is understandable. At the same time, it is useful to realise that today's traditional money is also based primarily on trust.

Since 1971, when the United States ended the dollar's convertibility into gold, modern money has no longer been based on direct backing by gold, but on trust in the state, the central bank and the economic system. Cryptocurrencies are likewise based on trust - just not in a bank, but in technology, the network and the rules used by the given system.

Banks have regulation, deposit insurance and a long history. At the same time, history shows that banks are not without risk either. Cryptocurrencies bring new opportunities, but also volatility, technological responsibility and the risk of loss.

The question, therefore, is not whether digital money is real. We have been using it for a long time. The real question is: whom or what do we trust when we hold, send or invest our money?

And that is precisely why financial education is so important. Because the better we understand money, the better we can distinguish between risk, opportunity and blind trust.