Topic: COVID-19 will pave the way for CBDCs (Read 907 times)

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

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.

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.

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.

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%.

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.

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.


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.

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

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.

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.

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.

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

Can you even prove what you have said? That people are practicing social distancing doesn’t mean that they will go for cryptocurrency, there are also other types of payment that people are making use of and they are all digital payments, it’s not just about cryptocurrency.

Where I live, most people are now making use of their banking apps when they want to make payments and some are making use of PayPal. I don’t see anyone that’s making use of cryptocurrency as a payment method; I know there are, but they are just few compared to the number of those that are making use of other payment methods

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.

there's been lots of mention from central banks about private stablecoins---not coronavirus---as the reason for the accelerated push towards central bank-issued digital currencies.

the Bank of International Settlements (BIS) is the first i have noticed who seems to be citing the coronavirus as the basis for a rapid shift towards such digital payment rails. earlier this month, they released this report: Covid-19, cash, and the future of payments


and last week, this: BIS Innovation Hub Head: COVID-19 Has Exposed The Value of DLT


whether or not the central banks are directly referencing the coronavirus pandemic in their reports, it will probably be a significant accelerating factor moving forward. i'm not sure what that means for bitcoin exactly.

This is some progress. It seems that countries worldwide are advancing to bring CBDCs to the masses. Especially now, when it's not safe to conduct transactions with physical cash due to exposure to COVID-19. With a fully digital currency, even physical credit/debit cards might cease to exist. Everything is shifting to the digital realm as we speak. The coronavirus pandemic will definitely accelerate the development of CBDCs and people will get used to the online world. Once everyone becomes interconnected, a whole new wave of possibilities is opened. One way or another, people will be forced to use a government-issued digital currency as physical cash will be phased out by central banks worldwide. I know it'll be hard for old people to get used to paying electronically at any store or retailer, since they've been accustomed to physical cash for a very long time. But I believe that adoption for CBDCs will increase slowly until everyone uses them massively for daily payments.

Now that major countries are beginning to work on CBDCs of their own, it should only be a matter of time before they start rolling them out for people in the mainstream world to use. Maybe China will be the first country to launch a CBDC? Or maybe it's the US? I believe that the first country to do this, will gain a major advantage in the world's economy. The US should adopt a digital dollar ASAP if it wants the "USD" to remain as the reserve currency of the world. Otherwise, it'll be left behind other countries with newly-adopted technologies that are bound to transform the worldwide economy. Just my opinion

Did you notice the report is talking about a national digital currency AND a European one? I started to wonder if the country is maybe planning to come back to the national currency without leaving the Euro money. In this case, they may use EUR only for Intra-European payments and the Dutch coin for the national payments

If they do it, there are some other countries that will do the same for sure. It would be nice, many of us in Europe regret a lot ours old national money since the Euro. The end of this stupid European centralization, yahoo!

There are a lot of more central banks working on CBDCs, so yeah no doubt we know what to expect now


https://www.theblockcrypto.com/linked/51526/at-least-18-central-banks-are-developing-sovereign-digital-currencies

The Dutch central bank becomes the next to announce planned testing of CBDCs. https://cointelegraph.com/news/dutch-central-bank-ready-to-play-a-leading-role-with-digital-euro


As far as the underlying motivation goes:


It's obvious which way the winds are blowing now. China, EU, UK, and the US are all moving towards CBDCs behind the scenes.

No one knows how a CBDC will turn out to be when launched. Governments could simply use Blockchain technology or a centralized database of their own. I think they'll use Blockchain tech for this purpose, considering their level of interest in the same after Bitcoin came into inception a long time ago. They can have their own private blockchain network where central banks act as "miners", "stakers", or "validators" of the same. Governments will simply run nodes in order to support the centralized blockchain network. No one from the outside will be able to build/develop on it, neither browse transactions performed on-chain. Since it'll be a permissioned chain (rather than permission-less like Bitcoin or Ethereum), central banks and governments will have full control over people's money. This is even worse than physical cash or credit/debit cards, since every single transaction can be easily manipulated at will by said entities with the power of Blockchain technology. Privacy will be a thing of the past in the new digital money system backed by governments worldwide.

I've seen somewhere that China has already been testing a digital wallet for its own CBDC. There are pictures across the web, showing a concept of the wallet's interface. It seems that China is serious in launching a digital Yuan to the world. It'll only be a matter of time before other countries follow. The COVID-19 pandemic has accelerated the development of CBDCs as we speak. The more people practice social distancing, the less physical cash/banknotes will be used in the mainstream world. This will further encourage governments to start launching CBDCs for the whole world to use. Believe it or not, CBDCs will be the future of the worldwide economy. Just my opinion

I've read some article a while ago that there are countries that is developing their own currency digitally. Fiat currency is strong however the digital currency is sweeping it away using innovation. China has been very positive with using digital currencies, their central bank is considering to create their own to prevent fiat based transactions which this time is very dangerous because of the virus. Some countries in Europe and Russia is designing their own CBDC.