The Race for Central Bank Digital Currencies (CBDC). Coronavirus the Catalyst to Digital Cash

Among the Covid-19 epidemic, cash is seemingly becoming less utilised, while most social locations are closed as lockdown laws are enforced across the globe, the general public are also refraining from using cash due to potential spread of bacteria.

Meanwhile, China is running ahead in the containment of the virus outbreak, and well in front with launching a nationwide blockchain infrastructure and Digital Yuan issued by the People’s Bank of China.

The Bank of International Settlements (BIS), a 600-member international financial institution representing the central banks of 60 countries, recently prompted central banks to create stimulus for CDBCs, as coronavirus can still spread through payment means asides from cash, the greater threat being card terminals.

In the recent months many other countries’ central banks have been exploring digital currencies and amid the current crisis those with already existing cashless culture will find it even easier for their public to adapt.

Sweden is an almost fully cashless society and it recently announced plans for an E-krona, while in South Korea, another digitally advanced country, the central bank recently launched a pilot program for testing Digital Won.

Western countries that utilise cash more frequently, such as the UK and Germany, have seen significant drops in cash and ATM usage, correlating an increase in mobile, card and digital payments.

The Bank of England recently published a 57-page report highlighting the pros and cons of introducing a digital pound, acknowledging that a digital currency could disrupt and destabilize current financial systems in negative ways. However, evolving FinTech can also positively affect financial systems by making payments easier, faster, cheaper and more secure.

Deutsche Bank also recently tweeted “The COVID-19 pandemic is accelerating the rise of central bank #digitalcurrencies as many governments see the handling of cash as a potential risk factor. This will likely add to calls to move towards #digitalcash”, hinting positive signs towards development of their own digital money.

France, another nation racing in the frontline for CDBC, is assembling framework and testing for Digital Euro, primarily for interbank settlements and potential tokenization for settlement and clearing of financial instruments. The Central Bank released a call for applicants package citing a search for counterparts of “innovative nature” to co-work on testing for Digital Euro.

The USA was recently also in the CBDC spotlight with mention of a Digital Dollar in the draft Covid-19 stimulus bills, which has since been removed.

Although, 2 notable advocates of a digital USD, both ex-workers of the CFCT (Commodities and Futures Trading Commission) launched the non-profit Digital Dollar Foundation at the start of 2020, which in recent weeks added 22 new advisors including staff from Goldman Sachs, Paypal, and a former Federal Reserve board member.

It seems that countries around the world are considering the feasibility of central bank-issued digital money and we may see governments moving faster than expected due to the COVID outbreak. Cambodia, Canada, Japan, Russia, Turkey, and Ukraine are just among some other countries that are planning, developing or testing central bank digital currencies.