A shift in payments behavior brought on by the COVID-19 pandemic – and concerns that physical cash might be a vector for the disease's spread – could spur demand for digital methods like central bank-issued digital currencies (CBDC).
That's one finding in a Bank of International Settlements (BIS) bulletin from April 3, which noted that "The COVID-19 pandemic has led to unprecedented public concerns about viral transmission via cash."
And while "scientists note that the probability of transmission via banknotes is low when compared with other frequently-touched objects," as the notice points out, central banks have taken steps to sterilize paper currency, for example, to help assuage such fears.
Still, as the notice's authors wrote:
"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."
One possible outcome: "Resilient and accessible central bank operated payment infrastructures could quickly become more prominent, including retail central bank digital currencies (CBDCs)."
To be sure, the notice doesn't predict that CBDCs – which largely exist in the realm of research and experimentation, with more advanced efforts seen coming out of China's central bank – but a persistent pandemic scenario could shift the landscape significantly.
"In the context of the current crisis, CBDC would in particular have to be designed allowing for access options for the unbanked and (contact-free) technical interfaces suitable for the whole population," the notice adds, concluding:
"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."