Deutsche Bank has claimed that the impact of the coronavirus will lead central banks to accelerate plans for digital currencies and move to a cashless system. Referencing a research piece by one of the bank’s macro strategists, Marion Laboure, they suggest that the risks of physically handling cash have now proven to outweigh the benefits, and a move to a completely digital monetary format is a likely outcome of the crisis for many countries.
— Deutsche Bank (@DeutscheBank) April 3, 2020
COVID-19 the Catalyst for Digital Revolution?
Laboure’s piece, which she wrote in conjunction with Juergen Braunstein, a fellow at Harvard University’s Belfer Center for Science and International Affairs, and Sachin Silva, a doctoral candidate and second Harvard University fellow, opens with the premise that COVID-19 “might turn out to be the catalyst that finally brings digital payments fully into the mainstream.”
Citing the fact that countries such as China and South Korea have been cleansing or even destroying banknotes due to their ability to harbor the disease, Laboure claims that “the coronavirus will accelerate an ongoing shift among younger populations toward digital payments”, with the shift particularly strong in Asia, and “specifically in China.”
Laboure adds that this trend was already underway before the spread of the coronavirus, with around 73% of internet users in China using online payments services by the end of 2018, an increase of 65% from ten years previously.
West Lags Behind…For Now
The West, the piece goes on, is less prepared for such a huge shift to a cashless society, both psychologically and in terms of infrastructure, but the impact of COVID-19 may force governments into action sooner than anticipated. This may take the form of a gradual phasing out of physical cash or, as countries such as China are implementing, a national cryptocurrency.
The former move is more likely for those governments that have yet to consider a move to a sovereign digital currency, but for those that were already exploring the concept, the impact of the coronavirus and the fact that physical cash has helped spread it might give them cause to push ahead with their plans to help mitigate future pandemics.