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I have seen a similar-ish question on here, but it doesn't quite match my inquiry.

Suppose you have an interstellar civilization (the means of travel between stars being stable two-way wormholes on the outer edges of each system), which has somehow also circumvented the light speed problem for communications. In other words, there is an interstellar internet equivalent present, so anyone anywhere can indeed communicate instantaneously with anyone else, digitally.

Also assume that this civilization descended from our world, albeit several millennia ago. Obviously, economies that far in the future aren't guaranteed to resemble anything we recognize, but let's assume the presence of fiat currency does exist.

What would be a justifiable reason for there to be at least small-scale, limited usage of physical currency in the form of coinage or minted bills, when for the most part, digital currency is honestly more convenient (even in our comparatively primitive world)? Assume that this digital currency is pretty much tamper-proof, protected by honest-to-god quantum encryption and other means that make it risk-free.

Excuse the verbosity, I felt things needed clarified for a comprehensive answer!

Reasons hard currency might still have a place in an interstellar society

• Diverse levels of technology between different star systems or planets or groups of that trade with each other. If the technology is ubiquitous and homogenous then cryptocurrencies would be sufficient. But on a frontier world or a mineral prospecting or animal hunting environment where the low-tech people need goods (fuel, heat, light, food, weapons, medicine, etc) and the high-tech people want what is mined, skinned, grown, or harvested then they could resort to barter or use hard currency


• Criminal activity. Since cryptocurrencies maintain a blockchain record of transactions, they could be used to convict someone of a crime. So to conduct illegal business some parties might demand payment in fungible resources. Just because the coinage is minted and accepted doesn't mean that a government had to issue it. A crime syndicate could mint coins that criminals could use to pay for services and items in a clandestine manner. Either the coins could be intrinsically valuable like gold or diamond or thorium or the crime syndicate could redeem them for cryptocurrency


• For commerce between civilizations, both might be high tech and have their own cryptocurrencies but there may not be an agreed upon measure of exchange or a way to spend the other civilizations currency in their own borders. Again, barter would work, but coinage is more convenient.

In general, both the Star Wars and Star Trek universes illustrate where cryptocurrencies would work and where the equivalent of cold hard coinage is required.

In the modern world, we all still use physical currency in certain situations and places because it can serve as a useful failsafe for small transactions in remote areas.

The problem with your digital currency is connectivity. That is going to be the case no matter how 'secure' and ubiquitous you make your communications. There are going to be disruptions. Your work experience quantum tunneler accidentally puts his axe through your wormhole, the comms system is disrupted in certain sectors by that pesky super nova that just HAD to happen while you're buying that moon you always wanted...

There simply is no such thing as uninterruptible communications.

So you're in some backwater out past Betelgeuse, trying to buy a coffee, and all of a sudden the cafe's transactional comms go down - what do you do? you pull out a couple of notes or coins.

It's true that physical currency is on the wane around the world now because digital currency is much more convenient, and arguably even safer (or at least requires a higher level of technical expertise to steal) but neither solution is perfect. Ideally, to get by you need a mix of both, especially in remote areas that can struggle staying connected.

Having some 'hard' currency on you for those little purchases for which a record of the transaction isn't so important may well be the order of the day in many places, especially if the cost of maintaining stable communications turns out to be prohibitive. I can't imagine any government (for example) investing in a wormhole to a given planet if the number of transactions being processed falls well below the break even point. While it is still incumbent on the state to provide the critical infrastructure of business, regardless of whether or not it will make a profit to do so, governments tend to get pragmatic about these matters and find workarounds that save them money.

Just ask those people in outback Australia about their promised NBN internet connections...

Biggest factor is trust.

In an evolving digital age, more transactions are becoming digitalized. Much of those digital exchanges are indeed backed by some hard currency somewhere. There is the cryptocurrencies out there that are not backed by anything, but the trust come from the fact that the currency will always be there and will always be exchangeable. Now if a server storing the currency data gets destroyed or the one person holding all the encryption codes dies (this did happen) then the whole currency becomes worthless over night.

To ensure security, a massive level of encryption is required. This would be troublesome for small, quick transactions at remote location. having local decryption machines may not be feasible. This would erode trust in the system when you cannot use your money when and where you want.