COVID-19 spurs demand for digital currency
Digital currencies have been touted as the next big thing for a number of years now. Its increasing popularity has even seen it pose a threat to the current monopoly that fiat money has on the world.
Yet it’s the ongoing COVID-19 pandemic that may serve as the tipping point for digital currency. With businesses and even banks having to shut down everywhere to prevent the spread of the virus, transacting in cash is no longer as easy as it used to be.
This is something that institutions all over the world are acutely aware of. Just last week, the US Senate proposed legislation calling for a central bank digital currency (CBDC) to get money moving faster in this time of crisis, considering those suffering from sudden unemployment and an overflow of expenses as a result of the crisis. TechCrunch reports that Kenya’s largest telco, Safaricom, “implemented a fee-waiver on East Africa’s leading mobile money product, M-Pesa, to reduce the physical exchange of currency in response to COVID-19.” China’s central bank has recently launched the digital version of the country’s currency.
It’s becoming increasingly clear that a digital currency revolution is underway. COVID-19 may just be an important watershed moment for it.
Is physical money dangerous?
Of course, aside from the efficiency brought on by digital currency, one particular advantage that makes it more attractive in the time of a pandemic is that it’s simply more hygienic.
In an article for ATM Marketplace, David Jones reports that, according to a spokesperson for the Bank of England, Great Britain’s central bank, “Like any other surface that large numbers of people come in contact with, notes can carry bacteria or viruses.” Though he also went to explain that the risk of handling a polymer note is no greater than touching surfaces like handrails or door knobs, the risk still remains nonetheless.
These findings were confirmed by the World Health Organization themselves, suggesting that dirty banknotes may spread the virus. People have been warned to wash their hands after handling cash and if possible, to use contactless payments instead.
What do central banks think about digital currency?
According to a paper published in January 2019 by the Bank for International Settlements, 70% of central banks “are currently (or will soon be) engaged in CBDC work.” The top motivations of central banks for issuing CBDCs (general and wholesale) are payments safety and domestic payments efficiency.
The paper also highlighted a pilot program completed by the Central Bank of Uruguay “to issue, circulate and test an e-Peso.” Interestingly, the country’s central bank started the pilot program because the government’s financial inclusion agenda was struggling to cope with the changes in cash behaviors. The BIS paper also noted that “Transfers took place instantly and peer-to-peer, via mobile phones using either text messages or the e-Peso app. The Central Bank of Uruguay’s legal mandate was sufficient to issue the electronic e-Peso as a complement to physical cash.” It’s not farfetched then to say that digital currency will also be crucial in the fight for financial inclusion.
If this can happen there, it can happen anywhere as well.
Digital currency in everyday use
Overall, the most obvious reason to use the digital currency is that cash, for all its worth, has many disadvantages. Besides being a possible carrier of coronavirus, cash can be a hassle to deal with. Paying with cash means showing up in person, having to wait in long lines, etc. This is something that’s already largely inconvenient in a normal state of affairs but becomes totally unthinkable in an age of quarantine and social distancing.
Of course, another reason why you might want to consider switching to digital is that it is very easy to be cheated when paying with cash. Imagine rushing to get to work and getting hungry. You spot a nearby food stall and hand over whatever is in your pocket. You get your sandwich and go. You only realize later that you handed over a $20 instead of a $10.
In contrast, with digital money you can easily check how much you’re spending, what item you’re paying for, and when the transaction occurred.
Banks all over the world have started to take notice of the benefits of digital money and businesses are no exception.
In fact, there are even companies enabling businesses themselves to go digital. Pundi X, for example, helps brick-and-mortar retail stores do transactions with digital currencies on the blockchain with the XPOS devices. Furthermore, the XPASS cards also allow for customers to instantaneously pay with digital currency. Paired together, customers can make payments directly from either Pundi X’s very own XWallet app or other blockchain wallets.
Pundi X’s offerings give businesses the opportunity to harness the full benefits of digital currency and blockchain without having to go through a rigorous and time-consuming process. This way, digital currency can truly be for everyone.
But if the presence of solutions like the one above aren’t enough to convince you that digital payments are the future, it’s worth considering that the digital payments market is projected to reach US$132.5 billion by 2025. The projected growth is attributed to the rising popularity of e-commerce sites and increasing use of mobile phones — both factors that are highly unlikely to go away anytime soon.
In conclusion, digital currency is simply more efficient, more transparent and even more hygienic compared to cold hard cash. All of these make it not just outright better to use during the ongoing crisis, but even necessary.
COVID-19 now presents digital currency with a unique opportunity to shine. Whether it will take full advantage of this chance remains to be seen, but it’s obvious that the mass adoption of digital currency is bound to happen someday.
It’s just a matter of when.