Bank of International Settlement Reports that COVID-19 Promotes the Development of CBDC

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After the spread of the new coronavirus pneumonia (COVID-19) worldwide, it has cracked down on economic activities and daily life in various places, but this time may be an opportunity to promote the development of central bank digital currency (CBDC) by central banks everywhere. The Bank for International Settlements (BIS) released a new research report today, pointing out that after the epidemic, the retail payment has made profound changes, and the advantages and disadvantages of the existing system are more revealed.

The BIS report mentioned that cash transactions recorded a significant decline due to merchants and consumers concerned about the risk of virus transmission. At the same time, because the economic outlook is still unclear, many people choose to hold cash, which also leads to a reduction in daily cash transactions. Affected by the epidemic, many governments have implemented many measures to reduce people’s contact. For example, stores have to stop operating for a period of time, and consumers’ demand for online shopping has continued to increase.

BIS believes that people’s daily lives are severely affected by the epidemic, but the existing electronic payment system can allow many economic activities to be transferred to the Internet to continue. However, this epidemic also revealed that the vulnerable groups in society failed to obtain normal financial services, which may affect their failure to obtain immediate government relief. As a result, the demand for electronic payments by the disadvantaged groups will increase, and BIS believes that lower-cost payment services should be launched in the future.

The central bank’s digital currency has the opportunity to make up for the shortcomings of the current system and bring about tremendous changes in the future. The report pointed out that the issuance of CBDC is not a response to cryptocurrency and private enterprise plans to launch stable currencies but to allow the central bank to pay more attention to technological reforms to achieve public policy goals. Successful CBDC can provide a safe, reliable, and widely used payment method, and under the global impact of the epidemic, central banks around the world think about the potential benefits of CBDC, which can make global transactions and payments more efficient.