In its latest report, the Bank of International Settlements (BIS) says the coronavirus pandemic has accelerated the need to create central bank digital currencies (CBDC).
The BIS report notes that central banks must realize this is the time to move ahead with development of CBDC projects; with COVID-19 haven exposed many cracks in the traditional financial system.
According to the Bank of International Settlements, central banks currently have an opportunity to intensify their efforts towards CBDC projects and digitization of their payments model.
The bank outlined that the introduction of a CBDC offers an advantage to the countries who launch first, as it will help tackle challenges with local banking processes, and give them an edge over other nations.
The BIS adds that the global financial sector is undergoing a transitional phase that is sure to transform the conventional monetary mechanisms, forcing central banks to shift aggressively towards digitization.
The report says the new CBDC systems will transform user experiences, promote speed, lower costs, build public trust, and ensure safety through contactless payments especially for the the vulnerable and unbanked.
During the early months of the Coronavirus outbreak, the BIS had urged central banks to fast forward efforts in CBDC development. This latest report shows how much the world of finance and payment has altered following the virus.
“The COVID-19 pandemic has highlighted both the progress achieved and the remaining shortcomings in payments. The ability to use contactless payments in physical stores and for online purchases has supported economic activity. Yet, digital payments are still not sufficiently convenient or accessible to all.”
As governments imposed nation-wide lockdowns, which included the closure of some physical stores, the number of online payments has increased dramatically. This coupled with the economic uncertainty has forced people to hold, instead of spending their cash, which has caused a decrease in daily cash transactions.
In response to these times, quite a number of nations/central banks have expressed interest in launching or testing central bank digital currencies.
Notable among them is China, which is currently testing its digital yuan currency across four cities in the country.
Outside Asia, European nations led by France, have seen increasing interest in piloting a digital euro for the region, as many central banks look to lead the digital evolution orn dominate private-issued cryptocurrencies like Facebook Libra.
Which county would launch the first official digital currency. Let us know in the comments?