The Musk Effect on the Payment System
X Money is the latest in a series of initiatives aimed at revolutionizing how we pay for the goods we purchase. However, it is debatable whether the retail payment system needs such a revolution
In a world where the number of smartphones is nearing that of people, and each device typically hosts two or three payment applications, the added value of X's new tool is limited
by Ignazio Angeloni
Once again, the global community of those interested in monetary and banking issues is in turmoil following the announcement by Elon Musk’s team—yes, him again—that the platform X (formerly Twitter) will soon offer a payment application called X Money.
Musk, who already controls and manages six companies, is preparing to assume a role in the upcoming U.S. administration akin to that of a minister, while somehow also finding time to become a video game champion.
This is not his first foray into this field; at the turn of the century, he co-founded PayPal with Peter Thiel. Now, the key asset appears to be the synergy with a messaging service boasting over 600 million global users.
This announcement is just the latest in a series of promised "revolutions" in the payments sector—a sector that once attracted little attention but has been repeatedly disrupted since 2008 when the mysterious Satoshi Nakamoto created Bitcoin.
A similarly loud buzz was generated in 2019 by Facebook’s (now Meta’s) announcement of its plan to launch a new global currency called Libra. That project ultimately failed, reportedly due to regulatory opposition, but more likely because of its haphazard conception. However, it left lasting effects.
Fearing they might be displaced from their exclusive domain —money— central banks have since been exploring the creation of their own digital currencies to complement traditional paper money: a "digital cash" known as central bank digital currency (CBDC). This project, strongly championed by the European Central Bank, has advanced to the research stage, but no country (except for China and a few other less significant examples) has decided to implement it, given the doubts surrounding its utility and associated risks.
X Money thus becomes the latest in a series of private and public initiatives aimed at revolutionizing how we pay for the goods we purchase. However, it is debatable whether the retail payment system even needs such a revolution. In recent years, the system has performed well, offering increasingly efficient, secure, and affordable solutions.
As often happens in modern communication, the noise generated by X’s announcement obscures the useful information available, making it difficult to discern what the new tool actually entails.
The reference model appears to be WeChat, the Chinese platform owned by Tencent, through which millions of users—Chinese and non-Chinese alike—transfer funds, primarily to Chinese deposit institutions.
With the caveat that information about Chinese operations is never entirely transparent, WeChat is not a sui generis bank but rather a platform for moving funds held on the balance sheets of other entities, typically intermediaries regulated by the Chinese government. X Money is presumed to follow a similar model.
This is the crux of the matter. In a forthcoming book (Money in Crisis, Cambridge University Press, April 2025), IEP@BU Director Daniel Gros and I attempt to bring clarity to the debate on digital currencies by tracing the historical origins and fundamental functions of money and examining how today’s various digital currencies fit into that framework and fulfill those functions. Written well before Elon Musk launched his latest venture, the book provides insights that help to understand this new tool as well.
The Digitalization of Money
Digitalization has brought tremendous benefits to the payments sector, but not all digital currencies are created equal. It is essential to understand that, even today, all money created by central and commercial banks—that is, almost all the money we hold and use—exists and is exchanged in digital form.
Whether transferred by checks or wire transfers in the past or through mobile applications today, this money relies on a robust infrastructure of deposit accounts at central banks, making it reliable and easy to use. The conventional payment system benefits from the security guaranteed by central banks and the high efficiency driven by private banks, which, though regulated, have strong incentives to invest and innovate.
A small portion of the money supply still exists in the form of banknotes. Cash survives and continues to grow globally because it is practical, reliable, and "discreet"—guaranteeing absolute privacy. It requires no supporting infrastructure, functioning even during blackouts, cyberattacks, or internet outages. This resilience makes it a valuable minor partner in an increasingly advanced yet technologically vulnerable payment system.
Cryptocurrencies, in their various forms, belong to an entirely different world. They are not recorded on the balance sheets of regulated intermediaries and, thus, lack the underlying infrastructure.
Due to their extreme volatility and the opacity of the processes governing their creation and circulation, cryptocurrencies can never replace actual money. They may appeal to speculators—who have recently profited, though they suffered losses in the past—and to criminals, but not to people who require a stable currency for daily needs.
What does this tell us about the prospects for a tool like X Money? It will likely serve as a supplemental option alongside existing, well-functioning tools offered by companies such as Apple, Google, and others.
As such, it will face fierce competition. The synergy with messaging may not necessarily be a winning card—especially since X ranks only 15th among global social media platforms. In a world where the number of smartphones is nearing that of people, and each device typically hosts two or three payment applications, the added value of a similar new tool is limited.
It is more plausible that X Money will heighten central banks’ concerns about being displaced in their domain, while adding to the challenges of those (increasingly few) that aim to respond by entering the market themselves, offering their own retail digital currency. The new competitor will only make this challenge even more daunting.
Ignazio Angeloni
Ignazio Angeloni is a part-time professor at the European University Institute in Florence and a Senior Policy Fellow at the Leibniz Institute for Financial Research SAFE in Frankfurt.
In 2019-2022 he was Senior Research fellow in the Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government. From 2014 to 2019 he was a member of the ECB Supervisory Board.
In 2012-2013, Ignazio was Director General for Financial Stability at the ECB; in that capacity he coordinated the establishment of the new banking supervision at the ECB. Earlier he was Director for International Financial Relations at Italy’s Ministry of Finance, Deputy Director General Research at the ECB, and Director of monetary research at the Bank of Italy.
Ignazio holds a degree from Bocconi University and a Ph.D. in Economics from the University of Pennsylvania and has published books and articles in leading academic journals.
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