The Bank of International Settlements (BIS), a cooperation of the world’s central banks, has provided some insights on the impact of COVID-19 and how the public is responding when it comes to using paper currency. Bulletin #3 called ‘Covid-19, cash, and the future of payments’ was released on Friday, April 3.
The bulletin highlights how public’s fears are high with respect to contracting the virus through the exchange of paper currency. While most studies show the risk of getting COVID-19 in this manner is low; the perception and the interest of the public on the subject of spreading the virus through paper currency is high enough that many central banks have taken actions to ensure trust in commerce is maintained.
A man retrieves newly circulating Tunisian bank notes from an ATM in the capital Tunis, on March 27, ... [+]
The bulletin notes, ‘The number of internet searches pertaining to both ‘cash’ and ‘virus’ is at record highs’. When compared to the swine flu, MERS-CoV and Ebola, the search intensity during COVID-19 on combinations of words including cash, coin, virus, covid, and corona has gone up significantly.
Graph indicating the rise in internet searches during COVID-19 on cash and virus is dramatically ... [+]
The bulletin notes that the probability of contracting COVID-19 through paper currency is very low to the scientific community and states, ‘To date, there are no known cases of Covid-19 transmission via banknotes or coins.’ Central banks are responding in a variety of ways across the globe in terms of how to ease the fears of the public on this issue.
The Bank of England told the public that touching currency was no greater risk than touching handrails, doorknobs, or credit cards. The Bank of Canada has asked retailers to stop refusing cash payments, as a way of defending the use of cash for commerce. Some central banks in China have focused on sterilization and quarantine measures of the banknotes, while India, Indonesia, and Georgia have moved in the direction of ‘contactless’ payments as measures to avoid exchanges by paper.
A municipal employee disinfects an ATM at a bank in the municipality of Jose C Paz, province of ... [+]
In terms of what the future holds, the bulletin estimates that COVID-19 could accelerate a shift toward digital payments. The policy concern for many countries would then be a ‘digital divide’ where unbanked and older customers may be left out of the financial system.
With the United Kingdom already seeing the challenges of paying with cash and the impact on the 1.3 million unbanked consumers, emerging countries that are leaning in on digital payments also may have populations where access is far from universal.
According to the bulletin, expected reactions in policy by countries included ways of defending the use of cash as well as implementation of central bank digital currencies. ‘Resilient and accessible central bank operated payment infrastructures could quickly become more prominent, including retail central bank digital currencies (CBDCs). Such infrastructures would need to withstand a large range of shocks, including pandemics and cyber attacks.’
BIS has been monitoring Bitcoin for some time and urged central banks to find ways to stop the use of Bitcoin early on as well as discrediting its ability to be a currency. Recently, BIS has started to signal that central bank digital currencies may be issued ‘sooner than we think’. With the concern of global stablecoins on the rise, COVID-19 might be the additional context necessary for banks to roll out central bank digital currencies at the retail level very soon as a countermeasure to the threat of global stablecoins.
The bulletin is attached below:
