While cash still remains an important facet of the global financial system, there is no getting away from the fact that its usefulness is diminishing. Cash has been replaced by digital forms of currency, and to this end, cryptocurrencies have come into play.
While cash is still vital because the central banks that issue it has total control and autonomy over it, and thus would not simply allow for a financial system dominated by something like Bitcoin, it does seem these banks are interested in the digital evolution.
In looking at a digital evolution for money, Bitcoin is still a private niche answer, but what has become increasingly more obvious as a path forward is blockchain-based assets issued by central banks. The idea of central bank digital currencies (CBDC) have reached most of the biggest central banks, with a digital dollar almost used to help fight the covid-19 outbreak.
It now appears as if the Covid-19 outbreak could accelerate central banks towards a CBDC as cash has been put on the back burner during these times for its potential to carry the virus and spread it through the transfer of paper money.
Taking no chances
Researchers at the Bank for International Settlements (BIS) think COVID-19 may accelerate the adoption of digital payments because it is changing the public’s relationship with cash, they said, despite the scientific community’s consensus that coronavirus transmission via banknote is relatively unlikely.
“Irrespective of whether concerns are justified or not, perceptions that cash could spread pathogens may change payment behaviour by users and firms,” the researchers said.
However, like a digital dollar or a CBDC, the issue would arise in places where there are a lot of unbanked, or elderly people who are not as technologically inclined.
“If cash is not generally accepted as a means of payment, this could open a ‘payments divide’ between those with access to digital payments and those without,” researchers said. Cash may, therefore, stage a comeback, the researchers admitted, but the pandemic “also calls for CBDCs.”
China getting close
China is one country that is probably getting the closest to launching a CBDC with its digital version of the yuan has been in the making for some time now. China is also looking to the coin to be a more meaningful way for the nation to control its people’s transactions as these will be visible on the blockchain, which is of course very much against the mandate of traditional cryptocurrencies.