As the affects of coronavirus continue to spread across the globe, halting travel, forcing social distancing, it is clear that traditional methods of doing things are being altered. One of the changes we have seen in the financial world is a shift in payments habits, as the global pandemic could increase adoption of Central Bank Digital Currencies (CBDC), according to the Bank for International Settlements.

ditto client LAB577, at the nexus of financial services and emerging technology are regulars on the blockchain speaker circuit. Recently, Richard Crook, Founder & Director of LAB577 featured on an 11:FS Blockchain Insider podcast with host Simon Taylor and Dave Hudson, Chief Engineering Officer of global blockchain software firm R3. The discussion focused on all latest blockchain and digital currency news including:

  • ‘Turning A Crisis Into An Opportunity’ China gets one step closer to CBDC
  • Shift in payments habits because of coronavirus fears could bolster central bank digital currencies according to Bank for International Settlements
  • HSBC Puts $10B of Private Placements on R3’s Corda Blockchain
  • Commodity Futures Trading Commision announces finalized guidance on the ‘actual delivery’ of digital assets

What is Central Bank Digital Currency?

Central bank digital currency (CBDC) is the digital form of fiat money (a currency established as money by government regulation, monetary authority or law).

Central bank digital currency is different from virtual currency and cryptocurrency, as they are not issued by the state and lack the legal tender status declared by the government. Public digital currencies could compete with commercial bank deposits and challenge the traditional make-up of the current fractional reserve banking system.

“We are now starting to see the Central Bank of China bringing in private companies to distribute the ledger, rather than hold it as a central ledger. This is the interesting space to watch.”
Richard Crook, Founder & Director at LAB577

Why has there been a shift in payments habits?

There are growing concerns that physical cash might be a culprit for the spread of coronavirus. This could spur demand for digital methods of payment that don’t involve cash handling – like central bank-issued digital currencies (CBDC).

“The COVID-19 pandemic has led to unprecedented public concerns about viral transmission via cash.”
Bank of International Settlements (BIS) , Report on 3rd April 2020

Even though scientists note that the probability of transmission via banknotes is low when compared with other frequently-touched objects, Central Banks have still taken special measures to allay public fears, such as sterilising paper currency.

“A realistic assessment of the risks of transmission through cash is particularly important because there could be distributional consequences of any move away from cash. If cash is not generally accepted as a means of payment, this could open a ‘payments divide’ between those with access to digital payments and those without. This in turn could have an especially severe impact on unbanked and older consumers.”
Bank of International Settlements (BIS) , Report on 3rd April 2020

A key finding form the report noted that resilient and accessible central bank operated payment infrastructures could quickly become more prominent, including retail central bank digital currencies (CBDCs).

“The pandemic may hence put calls for CBDCs into sharper focus, highlighting the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats.”
Bank of International Settlements (BIS) , Report on 3rd April 2020

About LAB577

LAB577 are at the nexus of financial services and emerging technology. They are specialists in leading high energy teams to shape and deliver maximum business benefits through emerging technology solutions for financial service institutions.

For more information on digital assets or digital transformation in financial services, contact LAB577 Account Manager, Joseph Lee or follow them on LinkedIn or Twitter.