Coronavirus speeds research around central bank digital currencies

According to the head of the Innovation Hub at the Bank for International Settlements ‘there is little evidence that cash transmits the virus, but COVID-19 has caused an unprecedented experiment in digitalisation across our lives’. Still, withdrawals from cash machines in Britain have plummeted since the national lockdown to fight the pandemic began in March 2020 as shops insist on contactless payments in some cases.

Besides the present situation that has prompted millions of people to turn to cashless payments, central banks have been examining how CBDCs could become a reality since Facebook announced plans to launch its Libra cryptocurrency stablecoin.

The BoE has published a discussion paper on a potential CBDC, whose uses could include cutting the cost of cross-border payments like remittances.

The head of the Innovation Hub at the Bank for International Settlements co-chairs a group of central banks working on the ‘building blocks’ of a CBDC and will report in October 2020. Central banks will introduce CBDCs but in a cautious way to avoid fragmenting the financial and monetary system, he added for Reuters.