As the novel coronavirus ravages the world, killing thousands, almost everything tangible including paper cash has been classified as a medium of conducting the COVI-19. Physical money isn’t safe anymore. You cannot know who touched it; did they have the virus!
And as a result, governments have resulted in the use of electronic payment methods with countries like Kenya upping its use of mobile money transfers. Other countries like South Korea had temporarily removed cash from circulating while China had recalled its paper cash for sanitization using ultraviolet rays.
However, mobile money and some of the other electronic payment methods that are currently in use are dimmed to be slow and could not possibly be efficiently used to deliver government stimulus to households or businesses.
Besides, most of the traditional electronic money transfer methods like mobile money, PayPal, Neteller, and the like are still centralized and depend on traditional banking systems.
As the majority of the world’s population currently works from home, the world could be preparing for the next phase of a technological boom, and blockchain technology could be it.
Central Bank digital currencies
At the beginning of April this year, the Bank of International Settlements (BIS) researchers suggested that the current pandemic would accelerate the adoption of digital currencies and fuel the debate of central banks issuing digital currencies.
And as a matter of fact, several central banks have started looking at the possibility of issuing digital currencies to reduce the use of paper cash which they are being forced to recall back for cleaning or destroying.
China became the first country to announce that it is going to launch a central bank digital currency, with the four largest commercial banks there starting a test of the digital currency this month. The city of Suzhou even suggested it is going to give some of the digital Yuans to government employees in the coming month for use for transport.
In the US, the House democrats suggested a digital dollar in a draft bill for the recently signed stimuli package. According to the members of the congress, the digital dollar would be rolled out by the central bank and distribute money directly to businesses and households. In this way, the process of distributing the stimuli package would be faster and more efficient.
In Europe, the German government is proposing the use of Euro-tokens that could be used in providing consumption vouchers that are based on blockchain. France also launched the atrial phase for testing the integration of the digital euro in settlement procedures.
Currently, the cashless economy does not necessarily mean a blockchain or cryptocurrency-based economy. Companies like Visa and Mastercard have long been in the market and they have helped promote the cashless economy for a while. Nevertheless, these companies are centralized, and cross border transactions are still expensive and time-consuming thus the need for better infrastructure and blockchain is the best shot at filling the gap.
Though governments have viewed cryptocurrencies as rivals to their centralized financial systems, it is just a matter of time before we witness a complete adoption of digital currencies in government institutions starting with the central banks.
The adoption of digital currencies will mean that government institutions like central banks will have to use blockchain technology to launch digital currencies.