Interest in Central Bank Digital Currency (CBDC) stems from developments that started with the financial crisis of 2008. The rapid growth of the cryptocurrency industry and the emergence of the digital transaction contributed to the physical currency’s fading role.
While cryptocurrencies have taken off globally, large and small countries have been seriously investigating the possibility for a long time to issue their own national digital currencies. Yet, right now, as the coronavirus pandemic stomps around the globe, we see attempts at realistic implementation.
As reported by Reuters on 21 April, The Dutch central bank (DNB) said on Tuesday that it would like to experiment with a digital currency issued by itself and other European central banks. The bank said that a CBDC would be a great help for its citizens because it would enable people and businesses to settle payments via accounts kept directly at the central bank. And it could also act as an alternative to the digital money commercial banks are offering.
The bank noted that people are less dependent on cash during the crisis, and that CBDC may be a solution to this situation. In several European countries such as the Netherlands, where two-thirds of all last year’s payments were digital, cash use is dropping rapidly. Bank added, this implies that businesses and citizens pay less with central bank money.
“This raises the question whether the central bank should issue a form of money that better fits their needs.”
DNB said citing the current coronavirus crisis as a case in point. With the nationwide lockdowns and social distancing steps, many small companies have been forced to close down all over the world. Indeed the many open businesses demand that clients not pay in cash.
“Many stores now ask clients specifically not to pay in cash, which effectively means that only private money is accepted,” it said.
Bank added, Above all, it might be appropriate to have a more comprehensive policy debate on CBDC, both within the Eurosystem and in the Netherlands, with more European regulations.
“If the decision should be taken within the Eurosystem to experiment with some more concrete type of CBDC, we are ready to play a leading role”