The Bank of International Settlements (BIS) anticipates the effect of the coronavirus pandemic on retail payments to trigger positive development of CBDC globally. BIS is a Swiss-based international organization comprised of 60 central banks. The organization has released several reports centered on decentralization, cryptocurrencies, and central bank digital currencies (CBDC). CBDCs refer to state-issued cryptocurrencies, whose legal tender depends on the regulatory structure of a government.
Coronavirus impact on global payments
BIS ‘latest June 24 report suggests that the coronavirus pandemic has inflicted extreme changes in retail settlements. In addition, the report outlines the advantages and disadvantages of the current payment systems.
The report, for starters, highlights the rapid deterioration of fiat payments due to the risk of transmitting the virus between traders and consumers. And the economic uncertainty has caused “precautionary holdings” in fiat, leading to a decline in daily cash transactions.
Around the same time, restrictions levied by national governments, such as closing down tangible shops, have contributed to a steady decline in payment settlement on e-commerce. Besides, the fall in travel has led to a decrease in international visa transactions, and a substantial decline in remittances from migrants.
BIS says both of these changes show the benefits and limitations of the current payment system. Digital payment systems, on the other hand, have made it possible for many commercial operations to operate given the great disruption to daily activities.
“The crisis has amplified calls for greater access to digital payments by vulnerable groups and for more inclusive, lower-cost payment services going forward.”
Opportunity for CBDC development globally
In this regard, the BIS report outlines that CBDC development is globally at the frontier of policy opportunities “for central financial authorities;” could amount to a sea change. ” It notes that a successful CBDC could provide” a new, secure, trusted, and widely accessible digital payment method.
The BIS also noted that it would continue to offer its assistance to central banks worldwide in CBDC research and design. The organization has demanded global cooperation to ensure that post-COVID-19, future changes in international payments will be less split, more comprehensive, and more productive.