The coronavirus pandemic is accelerating the development of central bank digital currencies (CBDCs) as it has prompted millions of people to turn to cashless payments, central bank officials said on Thursday.
Central banks have been examining how CBDCs could become a reality since Facebook’s efforts to launch its Libra cryptocurrency stablecoin raised the prospect of a private sector social media giant competing with traditional currencies.
“There is little evidence that cash transmits the virus but COVID-19 has caused an unprecedented experiment in digitalisation across our lives,” Benoit Coeure, head of the Innovation Hub at the Bank for International Settlements, said.
“COVID-19 will be remembered by economic historians as the event which pushed CBDC development into top gear,” he told an online event held by think tank CEPR and the London School of Economics.
Coeure co-chairs a group of central banks working on the “building blocks” of a CBDC and will report back in October.
Central banks will introduce CBDCs but in a cautious way to avoid fragmenting the financial and monetary system, he added.
“There is no such thing as an off-the-shelf CBDC,” he said.
Christina Segal-Knowles, executive director for financial markets infrastructure at the Bank of England, said the pandemic has accentuated an existing trend of shrinking use of cash.
Withdrawals from cash machines in Britain have plummeted since the national lockdown to fight the pandemic began in March as shops insist on contactless payments in some cases, she said.
The BoE has published a discussion paper on a potential CBDC, whose uses could include cutting the cost of cross-border payments like remittances, she said.
“We are actively exploring it given the potential opportunities,” Segal-Knowles told the event, adding it was still unclear what impact a CBDC would have on the financial system and implementation of monetary policy.