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