COVID-19 has acted as a catalyst for the development of central bank digital currencies (CBDCs), making its use as an everyday payment tool a greater reality. The pandemic and consequent fears of viral transmission resulting from hand-to-hand interaction plummeted the use of cash creating a heavy reliance on cashless payments. At an online event held by think tank CEPR and the London School of Economics, Head of the Innovation Hub at the Bank for International Settlements, Benoît Cœuré said that:
COVID-19 will be remembered by economic historians as the event which pushed CBDC development into top gear
In particular, the reliance on cashless payment systems have accelerated many banks’ interest in CBDCs, with Christina Segal-Knowles, executive director for financial markets infrastructure at the Bank of England (BoE) identifying that BoE has taken advantage of the accelerated shift in the payment system to explore different CBDC opportunities. Segal-Knowles referred to BoE’s discussion paper concerning a CBDC option which could remove cross-border payments to function as remittance. Although the development of CBDCs has sky-rocketed, it seems banks are planning to ease them in to not disrupt the current monetary system. This reflects the recent comments by the Reserve Bank of Australia.
On 4 March 2020, we discussed the reports concerning CBDCs’ potential implementation and viability and it seems now more than ever the use of these currencies will come into fruition. In light of such developments, it is likely we will see other CBDCs step-up during a period where cashless payment options are being sought.