Marion Laboure, a researcher for Deutsche Bank, has co-written a paper that suggests the current COVID-19 outbreak which has been known to transmit through the transfer of paper money, could accelerate the already heightened interest in Central Bank Digital Currencies (CBDC).
Many central bank governors have already highlighted the potential threat of paper money as a risk in spreading the coronavirus, but this is just a catalyzing effect for a move towards digital currencies. Central banks have, in recent times, shown a keen interest in issuing the next evolution of money.
Physical money has started becoming obsolete in the eyes of many nations. Something not as necessary in the digital age that we currently find ourselves in. Part of this drive towards a more digital form of cash may well be coming with the help of blockchain technology and the proliferation of Bitcoin, which many CBDCs are basing themselves around.
As Laboure was quoted as saying: “A once-in-a-century pathogen demands once-in-a-century solutions. An obvious place to start is to accelerate the inevitable shift toward digital currencies.”
Coronavirus the Catalyst for Future of Payments?
Deutsche Bank has been publishing its thoughts on the future of money and payments with another article, also co-authored by Laboure, indicating that cash will survive, for now. However, this was in January when the threat of the COVID-19 pandemic had not fully gripped the globe.
At the same time, the growth of CBDCs was also starting to take off. Indications from the World Economic Forum at Davos earlier this year suggested that major central banks were looking at the potential of shifting money to become more digital.
As the article by Laboure suggests, the push to drop paper money and drive the adoption of digital cash and CBDCs is strongest in China where the nation went about destroying paper money at the peak of the COVID-19 crisis.
China is also one of the world’s leading lights in relation to launching a CBDC based upon blockchain technology. The Chinese CBDC has been a long time in the making and was at one time seen to be accelerating in order to lessen the impact of Facebook’s Libra cryptocurrency. Now, it may be driven to launch quicker as the need for better payment systems has become obvious.
A Social Awakening
Part of the problem with switching away from paper money is the cultural habits that many nations have ingrained with regard to their payment methods. According to a recent survey by Deutsche Bank, one-third of respondents in developed economies consider cash to be their favorite payment method, and more than half believe that cash will always be around.
However, the Coronavirus crisis, which has pushed many shops to refuse paper money, may help these people to see the value in digital currencies. This is because they aid in increased convenience, thanks to the free and readily available digital wallets, as well as offering a simple way to track and manage budgets.