Finance & Economics

Central bank digital currency could help handle coronacrisis – report

Digital currency could provide policymakers with more effective tools to support the economy amid the coronacrisis

CBDC

How central bank digital currency could help handle coronacrisis – report. Source: shutterstock.com

Positive Money conducted research, proposing a central bank digital currency (CBDC) to be an electronic version of cash accessible to the central bank’s customers. According to the proposal, CBDC would represent a digital equivalent to payment methods such as physical notes and coins.

For now, cash only makes up 3% of the UK’s money supply, whereas the remaining 97% in the form of electronic bank deposits. The report highlights that cash plays the role of an anchor, maintaining trust in private bank money and the wider monetary system.

The data revealed that in 2018, banknotes and coins made up only 27.9% of payments across the UK, showing a decrease of 11.8% from 2017. If this trend continues, the report forecasts that cash will only make up 9% of transactions by 2028.

Policymakers must introduce a digital version of cash as soon as possible if we are to avoid the privatization of money itself. By providing a public means of payment, a central bank digital currency would ensure that such a fundamental part of our daily lives isn’t subject to private interests and their pursuit of profit
Konstantin Bikas, economist, research author

If cash continues to disappear, the monetary system could be left without this anchor, which could have devastating effects on the economy, especially during the pandemic.

This way, the report urges central banks to issue a CBDC as a digital form of public money to maintain trust in the monetary system.

We’ve reported that cash payments in New Zealand are set to face the decrease over the next four years as COVID-19 pandemic causes growing concerns,

SEE ALSO:

 

Pay Space

6735 Posts 0 Comments

Our editorial team delivers daily news and insights on the global payment industry, covering fintech innovations, worldwide payment methods, and modern payment options.