The Bank for International Settlements (BIS) believes that the coronavirus pandemic is accelerating the widespread adoption of the central bank digital currencies (CBDC).
According to the BIS report, the pandemic is changing people’s attitude towards cash, although scientists believe that the probability of being infected with coronavirus through banknotes is low. Whether these fears are true or not, many people have become interested in digital payment methods, among which the most reliable seems to be CBDC.
However, BIS analysts are concerned that if cash is no longer used as a means of payment, it will lead to a social stratification. People will be divided into those who have access to digital currencies and those who have no opportunity or ability to make digital payments (e.g. the elderly).
The BIS believes that national digital currencies should be easy and convenient to use. Digital currency developers must take into account the needs of people without minimum knowledge or access to banking technology. At the same time, the infrastructure of distributed ledgers must be resistant to threats such as cyberattacks or epidemics. Governments also need to be socially responsible to their citizens by providing them with different payment methods.
Within two years, the Bank for International Settlements will establish 4 new branches of the Innovation Hub for the study of financial technology (fintech) and digital currencies.
Benoît Cœuré, Head of the Innovation Hub, said that new branches will be opened in London, Stockholm, Toronto, as well as one for Paris and Frankfurt am Main. The new branches will have every opportunity to continue studying distributed ledger technology and digital currencies. In addition, they will explore other areas that are important for central banks: AI, cybersecurity, and digital payments.
BIS’s desire to open new Innovation Hub branches demonstrates that it continues to take the potential of fintech and digital currencies seriously. Previously, the BIS commissioned the Innovation Hub to research private stablecoins and government digital currencies.
In autumn 2019, BIS and the Swiss National Bank signed a cooperation agreement. In spring 2020, the Sveriges riksbank announced that it would lead the BIS initiative to study CBDC. The BIS also announced that the Innovation Hub will establish a strategic partnership with the U.S. Federal Reserve System. And according to a June announcement, the Innovation Hub will now cover:
Agustín Carstens, General Manager of the BIS: “The Innovation Hub is an investment in the future of the financial system and central banks. Its new branches will significantly increase our expansion and give global strength to the fintech.”