Posted 9 months ago | by @devadmin
In a report titled “Konzept #19 – What We Must Do to Rebuild” published this week, Deutsche Bank Research listed economic evaluations and proposals to aid global economies affected by the COVID-19 pandemic declaring that CBDCs would soon permanently replace cash.
Citing that “cash has come under much scrutiny during the pandemic” due to concerns about the virus’ transmission, Deutsche Bank Macro Strategist Marion Laboure writes of the need to “promote” digital currencies not to fall behind the countries that already do. According to Deutsche Bank’s research team, the coronavirus pandemic has accelerated digital payments over cash, which gives legitimacy to Central Bank Digital Currencies (CBDCs.)
Deutsche Bank called on governments worldwide and private companies to work on alternatives to credit cards, stating:
“Worldwide lockdowns and social distancing measures have only increased the use of cards over cash. To respond, companies and policymakers must design alternative to credit cards and remove middle man fees. […] For now, the priority must be on regional digital payment systems. In the long term, central bank digital currencies will replace cash.”
The European Central Bank through its president Christine Lagarde recently expressed that it’s in no rush to develop a CBDC, Deutsche Bank believes they are making a big mistake.
In the report, Deutsche Bank Research advised European policymakers about the risks of not developing their own digital currency project in response to China and Sweden’s active development of a CBDC.
The bank contended that lingering behind other jurisdictions might force the adoption of management by first movers:
“If other countries do not catch up, they may find that their companies are forced to adopt the digital currencies and policies of other countries as payment mediums.”
The bank called on Europe to develop a digital currency resolution to support the euro and aid the existing geopolitical situation. “To do this, we must have an independent European payment solution,” Deutsche Bank Research wrote.
However, many countries are behind in their progress for digital currencies, said Laboure. She used China and Sweden, for example, stating they are leading in central bank digital currency development. But if other countries do not catch up, “they may find that their companies are forced to adopt the digital currencies and policies of other countries as payment mediums,” said Laboure.
The U.S. and Europe, in particular, need to catch up, according to Laboure. Their development in the area is “too slow,” she said. While both the countries have been studying CBDCs, they do not appear to be in a rush to issue one.
Laboure said developed nations need to overcome two key challenges for the issuance and adoption of CBDCs: Low-interest rates and privacy concerns.
CBDCs could help in today’s atmosphere of negative real interest rates, according to Laboure. “That is because consumers currently have little incentive to deposit or save money. So, moving cash from under the mattress into a bank account is unlikely to happen (at scale) in the near term,” said Laboure.
“Similarly, with bank accounts paying low-interest rates, a CBDC could help disintermediate the banking system. People might choose to hold their money directly at the central bank.”
“On a region-by-region basis, the penetration of the smartphone, the rollout of 5G technology, and the advance of digital ledger technology, or blockchain, could all disrupt traditional card payment systems,” said Laboure.
Watch Bitboy Crypto explore the good and the bad of a cashless society in the video below.
Bitcoin is currently trading at [FIAT: $15,994.89] DOWN -1.8% in the last 24 hours according to Coingecko at the time of this report.