During the ongoing Covid-19 crisis, governments and Central banks across the world are stepping up research and pilot programs on central bank digital currencies (CBDCs) to deliver faster Covid-19 stimulus without using cash, according to the Bank for International Settlements (BIS).
Benoit Coeure, head of BIS Innovation Hub, highlights that the ongoing pilot conducted by the Bank of China to develop the digital Yuan has particularly provided many lessons for other central banks.
Contactless digital payments make it less likely for the virus to spread to others through cash exchanges, and Canadian businesses are already adapting to pandemic restrictions using digital payment solutions.
Since mid-March, businesses in that North American country have been receiving 35% more e-Transfer transactions than expected.
Moreover, PayPal recently hinted that it could enter the digital payments sphere by offering users the option to buy and sell crypto assets.
Digital payments such as Cryptocurrencies are ideal during a highly contagious pandemic, as they limit in-person transactions and ensure consumers can buy essentials from the comfort of their homes.
Contactless, Not Cash, Will be King
As Covid-19 infections peaked in April of 2020, pilot tests for the e-Yuan were conducted in the Chinese regions of Suzhou, Shenzhen, XiongAn, and Chengdu.
China’s impressive steps in creating a CBDC then seemingly pushed U.S regulators to consider the idea of the digital dollar.
As per a recent Forbes article, the House of Financial Services Committee’s Task Force on Financial Technology is set to hold a hearing on how to better deliver stimulus money during the COVID-19 pandemic, with the digital dollar set to be a major discussion subject.
Then, on Jun.18, 2020, the Italian Banking Association (ABI) approved the criteria for a CBDC, bringing Italy a step closer to agreeing in principle to the possible launch of digital euro.
The race by so many nations to pilot a CBDC led to Dante Disparte, head of policy at the Libra Association, to argue that there is an ongoing “space race” towards CBDCs.
The idea of CBDCs has now reached most of the biggest central banks, with more and more countries leaning towards technology to curb the spread of the virus.
Another recent example is Thailand, which is currently building a cross-border digital payment system to support bilateral trade in the corporate sector.
Bitcoin Is Getting More Adoption
The coronavirus has also seemingly propelled the use of cryptocurrencies such as Bitcoin, with new reports suggesting that the Venezuelan government has started accepting BTC as payment for passport processes.
And more recently, New Zealand-based firm Centrapay partnered with Coca-Cola Amatil to enable purchases at multiple vending machines across Australia and New Zealand using Bitcoin.
Unfortunately, the pandemic has also facilitated digital fraud, with a recent FBI report estimating that cybersecurity complaints have surged tremendously during the crisis.
Chainalysis has come out with a possible solution to the nagging problem of illicit activity in the crypto sector, arguing that exchanges should adopt more informed regulation and better enforcement of set rules.