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Central banker bulletin: COVID-19 cash concerns to drive digital currency

Ledger Insights | April 6, 2020

covid 19 and cash - Central banker bulletin: COVID-19 cash concerns to drive digital currencybulletin from the Bank for International Settlements (BIS), the body owned by 62 central banks, highlights cash concerns because of the COVID-19 virus. It states that perceived risks, valid or not, brings the potential for digital payments to the fore. And the BIS specifically makes a case for Central Bank Digital Currencies (CBDC).

In recent weeks, internet searches have shot up relating to COVID-19 and cash, especially in jurisdictions that use small denomination banknotes.

Additionally, research has shown that viruses can persist on banknotes. That’s based on past research relating to influenza and other viruses as well as more recent COVID-19 research, which show non-porous surfaces are better at transferring the illness.

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However, there are no proven cases of transmission through cash, and scientists found the risks are thought to be low compared to other frequently touched objects. The main risk for COVID-19 is thought to be airborne droplets. Plus, using cards at point of sale terminals also carries some risks, particularly PIN pads. In both cases, washing hands is important.

Examples given of central bank actions include the Bank of England statement: “the risk posed by handling a polymer note is no greater than touching any other common surfaces such as handrails, doorknobs or credit cards”. China disinfected cash in some regions, and South Africa has seen scams claiming money is being withdrawn from circulation in order to relieve people of their cash.

One of the most interesting observations is that in a financial crisis, one usually sees a flight to cash. While cash in circulation has increased in the U.S., so far ATM withdrawals in the U.K. have fallen. Although restricted movement is likely to play a major role in that.

BIS Bulletin:  Covid-19, cash, and the future of payments 

Key takeaways:

  • The Covid-19 pandemic has fanned public concerns that the coronavirus could be transmitted by cash.
  • 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.
  • To bolster trust in cash, central banks are actively communicating, urging continued acceptance of cash and, in some instances, sterilising or quarantining banknotes. Some encourage contactless payments.
  • Looking ahead, developments could speed up the shift toward digital payments. This could open a divide in access to payments 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.

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