As per the recent reports, the Bank of International Settlements (BIS) has placed its bets on Central Bank issued Digital Currencies and digital payments. In the wake of the COVID-19 outbreak, the BIS has published a report, seeking central banks across the world to start developing CBDCs. The BIS is a 600-member international financial institution that represents as many as 60 central banks across the globe.
The World Health Organization issued a warning recently in regard to the spreading of COVID-19 via banknotes. The BIS report suggests that there has been a negative sentiment among the public in using cash, post WHO’s announcement. In its report, BIS argued that credit card terminals and pin pads also a potential risk to the spreading of the deadly virus. It says, “Scientific evidence suggests that the probability of transmission via banknotes is low when compared with other frequently-touched objects, such as credit card terminals or PIN pads.”
In this scenario, the BIS has actively argued for the necessity of CBDCs and digital payments. However, the report suggested that these CBDCs should be developed in a manner that can withstand pandemics and cyber attacks. It stressed on the fact that the current risks of transacting in cash and credit cards could well end up being a catalyst to the prominence and adoption of CBDCs. Despite its inclination towards CBDCs, BIS also acknowledged the fact that doing away with cash and going completely digital could exclude the unbanked section of the society.
The report says, “Looking ahead, developments could speed up the shift toward digital payments. This could open a divide in access to payment instruments, which could negatively impact unbanked and older consumers. The pandemic may amplify calls to defend the role of cash – but also calls for central bank digital currencies.”
Cash transaction trend declines in the UK
Since the COVID-19 outbreak, the demand for cash has somewhat reduced in the UK. ATM withdrawal rates have also plummeted. BIS predicts that this horrific global health crisis could drive consumers towards higher precautionary holdings of cash and increased mobile, card and online payments.