The Bank of International Settlements (BIS) has endorsed Central Bank Digital Currencies (CBDCs) and digital payments in the wake of the COVID-19 pandemic.
BIS represents the central banks of 60 countries worldwide and has over 600 members. Through a report, the BIS endorses CBDCs following the worries raised by the outspread of coronavirus pandemic through the existent payment methods.
BIS endorses CBDCs but warns against credit cards
Moreover, BIS highlights the negative attitude by consumers towards use of notes in reaction to the alert raised by the World Health Organization (WHO) following the spread of COVID-19 through paper money.
Although BIS highlights the concerns raised by WHO, it emphasizes through the report that the transmission threat posed through credit card terminals and ATM machines is even worse. The report reads:
“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.”
ATM withdrawals in the U.K. fall
Nevertheless, the report claims that the demand for cash has always hiked during past disasters. It states that the consumers seek for a more solid store of value and exchange means. Despite reporting increased movement of greenbacks in the United States, the report states that there has been a significant fall in ATM withdrawals in the United Kingdom.
As a result, the report notes that the pandemic could result in insurance holding of huge amounts of cash and also an increase in mobile and digital payments.
BIS claims that due to the current situation, central bank operated digital payment systems such as CBDCs can quickly gain traction. However, BIS stresses that the need for central bank digital currencies to be tailored to hold out against diverse situations such as pandemics and cyber attacks.
Despite its strong advocacy for CBDCs; BIS cautions that the transition from fiat as a legal tender could result in ‘payments divide’; between those with access to digital payments and those who are lacking. This would have acute consequences on the unbanked and the elderly consumers.