Picture: 123RF/Dzmitry Kliapitski
Picture: 123RF/Dzmitry Kliapitski

The coronavirus outbreak will accelerate the adoption of digital currency and payments, says a research report by the Bank for International Settlements (BIS).

The global Covid-19 pandemic has halted economic activities in many parts of the world, with governments imposing lockdowns to curb infections. The BIS report points out that the pandemic has led to unprecedented public concern about viral transmission via cash.

BIS, a global bank tasked with promoting international monetary and financial stability, says despite scientific evidence that coronavirus transmission via banknotes is highly unlikely, the disease is likely to change payment behaviour.

Another report published earlier in April by the Economist Intelligence Unit says concerns about the highly contagious and potentially deadly coronavirus could accelerate digital currency adoption, with awareness and use trends already high. The report suggests that societies across the world are already leaning towards cashless options for daily purchases, based on convenience and traceability reasons.

“Central banks report a large increase in queries from the media on the safety of using cash. The number of internet searches pertaining to both ‘cash’ and ‘virus’ is at record highs,” the authors of the report said.

However, scientists note that the probability of transmission via banknotes is low when compared with other frequently touched objects. To date, there are no known cases of transmission via banknotes or coins.

To bolster trust in cash and guarantee universal acceptance, several central banks have actively communicated that risks are low and taken further action, says the BIS. The Bank of England has noted that “the risk posed by handling a polymer note is no greater than touching any other common surfaces such as handrails, doorknobs or credit cards”.

Other central banks have taken further measures. In February, the People’s Bank of China began to sterilise banknotes in regions affected by the virus. In March, the US Federal Reserve confirmed it was quarantining bills arriving from Asia prior to recirculation, the BIS noted.

The bank said irrespective of whether concerns around the spread of the virus via banknotes and coins are justified,  perceptions that cash could spread pathogens may change payment behaviour by users and firms. In past crises, demand for cash has often increased as consumers have sought a stable store of value and medium of exchange. At the current juncture, data do not yet paint a uniform picture.

In the US, cash in circulation has recently increased. But in the UK, automated teller machine (ATM) withdrawals have fallen. The authors of the BIS report said in the medium term, the outbreak could in principle lead to both higher precautionary holdings of cash by consumers and a structural increase in the use of mobile, card and online payments. Yet not all digital payments are immune. For instance, debit and credit card transactions generally require a signature or a PIN entry at a merchant-owned device for larger transactions.

“[Therefore] resilient and accessible central bank-operated payment infrastructures could quickly become more prominent, including retail central bank digital currencies … Such infrastructures would need to withstand a large range of shocks, including pandemics and cyber attacks,” the authors of the report said.

In SA, finance minister Tito Mboweni said in 2019 the SA Reserve Bank was exploring the benefits and risks of issuing a central bank digital currency, which would essentially be the equivalent of digital cash.

phakathib@businesslive.co.za

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