As concerns grow that the coronavirus could possibly spread through the use of cash, the concept of central bank digital currencies (CBDC) is growing increasingly popular in some circles. The idea have been around for some time, with multiple countries expressing an interest in issuing their own.
In their latest forecast, researchers at the Bank for International Settlements examined how the outbreak could both stimulate demand for digital currencies and urge governments to act sooner.
The team believes sovereign nations might investigate expanding their monetary infrastructure by providing an easily accessible platform for online transactions. The analysis points out that a key motive behind creating such an infrastructure would be to shield a nation’s payments system from various crises.
While there is a fair amount of divide in regards to how the virus is spread, images of central banks sterilizing their cash have done little to reassure citizens. Going through search engine data, the researchers found that people around the globe have sought alternative payments options over the last 30 days. These search queries were especially prominent in countries with smaller bills, such as the U.S., U.K. and Australia.
In the months before the coronavirus outbreak, the debate over CBDCs grew more intense as China prepared to launch a digital yuan. Many felt that this would give the nation too big of an advantage in global finance and pushed for the U.S. to issue a digital greenback to balance the scales. A digital dollar has already been mentioned in three separate bills, and U.S. lawmakers revealed that they are examining the possibility.
In a coronavirus teleconference held on April 1, Argentinian governor Jorge Capitanich advised Alberto Fernandez, the country’s president, to create a digital payments system in order to better deal with the virus.
Regardless of how likely the spreading of the virus through cash might be, the pandemic has highlighted several reasons why CBDCs should be in serious consideration. Digitalizing national payments systems would safeguard economies from many potential blows by greatly expanding consumers’ options when it comes to payments choices. Likewise, the contagion has amplified existing interest in digital currencies and increased the number of people willing to make a switch to an all-encompassing digital payments system. Whether CBDCs come to life as a direct response or not, the outbreak appears to have already shifted public perception in favor of digital currencies, and demand for them should persist even after the crisis has been dealt with.