The Covid-19 pandemic will fast track the development of Central Bank Digital Currencies (CBDCs). According to Deutsche Bank macro strategist Marion Laboure, there is a fear that cash transactions are spreading the virus fast. The threat of cash spread infections will motivate central banks to work on digital currencies according to Laboure. Back in mid-February China started to lock away its used notes out of fear of more Covid-19 spreads.
Cash alternatives a necessity right now
According to Laboure, governments are increasingly viewing cash handling as a potential threat. Research from 2008 showed that the influenza virus could survive on banknotes for as long as 17 days, which justifies the fear that governments have. Fear of cash handling infections will likely provide a hard nudge that makes central banks pursue digital alternatives. Another tweet from a Deutsche bank official read
“A once-in-a-century pathogen demands once-in-a-century solutions. An obvious place to start is to accelerate the inevitable shift toward [digital cash].”
Laboure also co-authored an article that was published by news outlet Project Syndicate on March 19 which read;
“While Chinese authorities have been destroying banknotes that have potentially come into contact with the coronavirus, Western countries remain woefully behind not just in their response to the pandemic, but also in adopting digital payments. One silver lining to the COVID-19 crisis is that this may soon change.”
Digitized transactions a success in Kenya
Some governments have found it easier to discourage cash transactions than others. Kenya’s president Uhuru Kenyatta recently discouraged the use of cash transactions within the country’s borders. This is easily doable in Kenya because of a very advanced mobile payments system in the country. Mobile payment services like Mpesa have been instructed to waive transaction fees for amounts of up to 1,000 KES ($10). The ease of digitizing transactions in countries like Kenya, beg the question of whether their central banks need to even be thinking about CBDCs.