COVID-19 will pave the way for CBDCs

[tvplus006]

I don't see any difference between using the national digital currency and a payment card. The difference in the use of CBDC and credit cards will not even differ in the calculations. But of course CBDC is more profitable for the government from an economic point of view.

CBDCs could increase efficiency and reduce costs at every level. With them, there will be no need for credit/debit cards or even physical cash. Instead, governments will act as direct custodians of your money. Payments will be performed directly from one person to another without the need to go through a payment processor like VISA or Mastercard. The network will be entirely backed and operated by a central bank and the government itself.

As COVID-19 encourages people to practice social distancing, they'll become used to making digital payments in the online world. This will accelerate the development and launch of CBDCs more than anything else. Before COVID-19, it was announced that some countries will begin testing CBDCs. But the level of interest back then, was not the same as it is right now. China could be the first country to launch a CBDC, leaving the US in the dust. I hope it doesn't end this way, as it'll truly remove the US Dollar's place as the reserve currency of the world. If the US wants to stay ahead of the game, it'll need to approve the development of a digital dollar ASAP.

No matter how long it takes for people to begin using CBDCs, we cannot deny the fact that physical cash will be a thing of the past. We'll live in a future where CBDCs and cryptocurrencies will live alongside each other for many generations. The world's economy will be truly digital like never before. Salaries will be paid in digital money, while goods can be purchased with it. And all of this can be done with a computer or mobile device without the need to carry a wallet with you. COVID-19 will truly change our lives as it brings innovation to many of the world's industries. Our economy will never be the same as it was when physical cash was used by many people worldwide. Just my opinion

I understand the advantages of digital money for the government. I wrote that the transition from credit card payments to CBDC will be invisible to the average person. But I don't agree with you about CBDC replacing fiat. Fiat will be indispensable in places where there is a problem with the Internet and electricity.

[bittraffic]

If you believe that there is nothing sort of a coincidence, you could really think that someone out there had planned it out there paving its way to CBDC, and China has something to do with it. I wouldn't start discussing conspiracy theories in this thread though.

But replacing fiat may not be what will happen. China's DCEP will be just the first of the example about this but its still somewhat of the digital fiat.

[bitgolden]

There are people who are so old that, they couldn't even adapt to credit cards, literally going to banks to withdraw their money in cash and still using that cash. At one point I find it very smart because those people do not really know the idea of debt that much, they have a certain amount of cash at hand and they use it and use it only.

We are not like that, we live in a system where we are always in debt, which is why it is harder for us, the bigger that debt goes the more we have to work and we only have on life almost all of which will go with paying off debt. So, at the end of the day you will not be able to convince someone to understand what CBDC is when they are barely understanding the concept of credit cards.

You have to wait for them to die (I know a bad thought, we all have elderly) and eventually people who understand this will be the old people.

[Abiky]

There are people who are so old that, they couldn't even adapt to credit cards, literally going to banks to withdraw their money in cash and still using that cash. At one point I find it very smart because those people do not really know the idea of debt that much, they have a certain amount of cash at hand and they use it and use it only.

We are not like that, we live in a system where we are always in debt, which is why it is harder for us, the bigger that debt goes the more we have to work and we only have on life almost all of which will go with paying off debt. So, at the end of the day you will not be able to convince someone to understand what CBDC is when they are barely understanding the concept of credit cards.

You have to wait for them to die (I know a bad thought, we all have elderly) and eventually people who understand this will be the old people.

That's certainly true, mate. Old people will find it hard to use digital money in the online world. Despite the benefits credit/debit cards provide, old people have "sticked" to physical cash for a very long time. Only new generations (mostly millennials) have made use of digital payments in their daily lives. Because of this, I believe that the process of transitioning from physical cash to a CBDC will take much longer than expected. Governments will have to slowly introduce digital money alongside physical cash until the latter is phased out from mainstream use. Only then, the battle will be between CBDCs and decentralized cryptocurrencies like Bitcoin and Ethereum.

I believe that COVID-19 has accelerated the need for a CBDC since physical cash can serve as a way to propagate the virus more thoroughly. With people becoming more interconnected in the online world as a result of social distancing measures, the future of money will be digitized as we know it. Of course, credit/debit cards can still be used online but they're extremely inefficient for money transfers across borders. A CBDC powered by Blockchain technology should make payments faster, and cheaper than never before. I believe that governments will act as nodes of their own private blockchain network, while central banks will be in-charge of "mining" the CBDC. The person using a CBDC will not notice much difference to the traditional banking system of today, because the system will be centralized. But the way it works internally, will be just like crypto. Just my thoughts

[exstasie]

I believe that COVID-19 has accelerated the need for a CBDC since physical cash can serve as a way to propagate the virus more thoroughly.

Analytics firm S&P Global agrees with you. They just put out this piece yesterday: From hygiene to aid, COVID-19 strengthens case for central bank digital money

According to Deutsche Bank, we could see CBDCs circulating within the next three years.

"We are of the opinion that the current pandemic can significantly speed up existing plans by central banks to implement CBDCs," Adam Bujnowski, head of consulting at Zeb Consulting, a Poland-based firm that advises on financial services, told S&P Global Market Intelligence.

For example, the coronavirus outbreak has sped up a shift towards digital payments thanks to fears among the general public about contagion from bank notes and coins, he said.

The more the public becomes habituated to digital payments, the more we can expect a "diminished role" for cash transactions, even in a post-lockdown world, Bujnowski said, adding that this is will be especially true if there are lingering concerns about hygiene.

Experts believe that the coronavirus could accelerate digital payment adoption even in societies that have traditionally been heavily cash dependent, such as Italy.

In a future where cash takes a back seat, CBDCs would be a chance for central banks to issue a monetary instrument that acts in the same way as cash and is still "under their full control," Bujnowski said.

That last line is a little ominous. They now have a great excuse to phase out cash, so of course they're seizing the opportunity.

[d5000]

CBDCs could increase efficiency and reduce costs at every level.

Well, one of the reasons I think governments are still waiting with CBDCs is just an efficiency problem. This has to do with changes to the current economic model which could be provoked by CBDCs.

Basically, CBDCs could lead very fastly to a centralization of the banking sector. As normal people do not need bank accounts anymore because they can open CBDC accounts, they would open a bank account only for special purposes, e.g. if they need a loan or if they are entrepreneurs needing to accept certain payment forms. This would rapidly lead to a situation where 1) as banks continue to have to respect the fractional reserve policy of their country, they would come in need to borrow more money from the Central Bank and 2) this and the collapse of the "account market" would very fastly lead to the banking sector becoming much smaller and more concentrated.

What has this to do with efficiency? Well, it's believed in many economics theories that a private - and fairly decentralized - banking sector with dozens or hundreds of competing banks is more efficient in detecting the needs of the local economies, above all when they give out loans to local businesses. With strong CBDCs and a weak banking sector, the Central Bank would have to try to compensate for these advantages of local/smaller banks - they would need to try to foresee the needs of local businesses all over their jurisdiction and plan accordingly. So basically the systems would have more characteristics of a centrally planned economy, and almost universally it's believed in economics that these systems are less efficient when it comes to allocation of resources (see the collapse of the Soviet Union as an example)*.

Now there is a twist still: with P2P loans and even Bitcoin/crypto ICOs (which are, in reality, another form of "loan" to raise funds for businesses and projects) there are new loan mechanisms from the digital era. If these could replace part of the role local banks played before, then CDBCs could work well. But I think governments distrust these loan mechanisms and so they're still waiting and testing.

*China is a strange exception to that theory, and they have long experience with a centrally managed economy, so it's no surprise they're most advanced regarding CBDCs.

[Lizzylove1]

For some time now, I have been making almost all my payment through electronics transfer, resolve all my banking issues online except I need to sign off a mandate or pick an ATM card from the bank. I honestly see no much reason printing money and storing them inside the bank vault with policemen and security forces on guard,  and making cashiers to keep counting cash with the hazard that comes with it. Many banks in my city have shut their doors because of Covid-19, and they said people must think digital to safeguard our health. We must move away from paper money at lest with 90%.

[salamat700]

The ongoing debacle created by the Covid19 virus from Wuhan, China is becoming the top main reason why central banks can be going to digitalize their national currencies. We know that changes on that level are not easy to come by and for sure the digitalization proposal can take some time...but with the virus things can be hastened. With developments now underway in China (ironically, the source of the current virus), I am sure that other nations will not hesitate to look at the advantages of this idea.

[azmirihaque]

In times where social distancing is a must, the way we make payments changes in its entirety. Physical cash will cease from existence, as they serve as "carriers" or "vehicles" of the deadly coronavirus "COVID-19". Governments will notice that printing more money will not be worth their time, leading them towards the creation of their very own digital currency. That is if the pandemic continues extends long enough in order to have a negative impact on the world's economy.

Considering that everything has been moving to the "online world" lately, I believe that the coronavirus pandemic will pave the way for CBDCs (Central Bank Digital Currencies) quicker than we've expected. After all, it'll be much safer to conduct transactions online (and eco-friendly too) than doing so in the physical realm. Crypto will rise like never before because of this, leading towards the accelerated development of CBDCs.

While many countries like the US and Russia are skeptical about crypto/Blockchain technology, they might change their stance once they see it's no longer worth printing physical cash. China has already been working on a CBDC solution of its own, so it's only a matter of time before it starts rolling it to the public.

What are your thoughts? Will this be the era of CBDCs? Or is it still too early to tell?

I think so like you. People are now staying at home leaving their work. Now they are trying to engage in online bill, online shopping, online marketing, online business, online investment etc. In this case, necessary of digital currency inevitable. Many people are now being interested to cryptocurrency. Many of them are investing in this platform. So, I think Central banks of the countries will consider the matter to permit crypto as a digital currency for transaction in near future.

[mersal]

Already some governments said that they are going to encourage digital payments from now on, so possibly some governments will create their own digital currencies especially China will do that in near future.But we those centralized payment system still useless to the citizens and with the digitization governments can intrude into our privacy more compared to banking transaction mode.

[Abiky]

Well, one of the reasons I think governments are still waiting with CBDCs is just an efficiency problem. This has to do with changes to the current economic model which could be provoked by CBDCs.

Basically, CBDCs could lead very fastly to a centralization of the banking sector. As normal people do not need bank accounts anymore because they can open CBDC accounts, they would open a bank account only for special purposes, e.g. if they need a loan or if they are entrepreneurs needing to accept certain payment forms. This would rapidly lead to a situation where 1) as banks continue to have to respect the fractional reserve policy of their country, they would come in need to borrow more money from the Central Bank and 2) this and the collapse of the "account market" would very fastly lead to the banking sector becoming much smaller and more concentrated.

What has this to do with efficiency? Well, it's believed in many economics theories that a private - and fairly decentralized - banking sector with dozens or hundreds of competing banks is more efficient in detecting the needs of the local economies, above all when they give out loans to local businesses. With strong CBDCs and a weak banking sector, the Central Bank would have to try to compensate for these advantages of local/smaller banks - they would need to try to foresee the needs of local businesses all over their jurisdiction and plan accordingly. So basically the systems would have more characteristics of a centrally planned economy, and almost universally it's believed in economics that these systems are less efficient when it comes to allocation of resources (see the collapse of the Soviet Union as an example)*.

Now there is a twist still: with P2P loans and even Bitcoin/crypto ICOs (which are, in reality, another form of "loan" to raise funds for businesses and projects) there are new loan mechanisms from the digital era. If these could replace part of the role local banks played before, then CDBCs could work well. But I think governments distrust these loan mechanisms and so they're still waiting and testing.

*China is a strange exception to that theory, and they have long experience with a centrally managed economy, so it's no surprise they're most advanced regarding CBDCs.

Good point. Central banks need to throughly test a CBDC before launching it to the public. As you've mentioned earlier, there's still the problem of efficiency. Banks are trying to figure out how to launch their own digital currency solutions without sacrificing efficiency and stability. It'll be hard to make people use a CBDC over physical cash in its very beginnings, since old people are not willing to change the way they use money. Maybe in a couple of years from now, we'll be able to experience digital payments more throughly.

One thing for sure is that China has been quickly advancing the development of its own CBDC. If it manages to launch it first than any other country, it will have a "leading edge" on the world's economy. Then, it'll be the battle of supremacy as other countries try to launch their own CBDCs as well. The US does not want to lose the "USD" as the world's reserve currency, so I think it will begin the adoption of a digital US Dollar soon. Once CBDCs become a reality, there will be a transformation in many of the world's industries as well as the mainstream economy. Payments between banks (B2B transfers) will be blazing fast, while costs will be reduced like never before. It'll be a new era where intangible items will prevail over tangible ones. Either central banks use a Blockchain of their own, or simply rely on an existent one like Ripple's XRP Distributed Ledger.

Nonetheless, people are still using physical cash and credit/debit cards despite COVID-19. I believe that CBDCs will continue to be in development during the next few years, until they're ready for launch. The main concern will be people's privacy over mainstream transactions performed with a CBDC on top of physical Fiat. But that's something we don't need to worry about at least for 20 - 30 years from now. Just my opinion