Researchers at the Bank for International Settlements (BIS) think COVID-19 may accelerate the adoption of digital payments and sharpen the debate over central bank digital currencies (CBDC).
They issued their forecast in BIS’ April 3 Bulletin. COVID-19 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.
For starters, countries may expand digital payment infrastructure with more online, mobile and contactless options after COVID-19. Digital adoption actions could have an “especially severe impact” on millions of older and unbanked people, though.
“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.”
CBDC could bridge society’s need for digital payments with its responsibility to those who cannot easily access them. There are a few caveats: Central banks would have to tailor their CBDCs to “the context of the current crisis,” by making payment contactless and accessibility universal, the researchers wrote.
“The pandemic may hence put calls for CBDCs into sharper focus, highlighting the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats,” they said.
Indeed, some politicians are already proving the researchers’ prediction true. Jorge Capitanich, governor of Argentina’s Chaco province, advocated for “digital currency transaction systems” that phase out cash usage in an April 1 coronavirus teleconference with President Alberto…