Global banks look towards digital currencies.
Digital advancements across the globe
As a digital future becomes a daily reality for many, banks across the world have been moving towards digital currencies.
In February, as the spread of the virus was accelerating, the People’s Bank of China announced that they would be destroying or disinfecting any cash that had been collected in high risk COVID-19 environments, such as hospitals and public transport. Alongside this profound public safety change, China progressed their plans to bring in a digital Yuan (Yuan is the Chinese currency) to replace cash in China. They began testing the new digital Yuan in major cities across China in April. 50,000 Chinese nationals tried the digital currency, leading to the digital Yuan becoming formally adopted in many parts of China; a likely sign of wider incorporation in the country to come.
Meanwhile, research conducted by Deutsche Bank has been tracking the progression of other digital currency projects across the globe, with 20 projects currently being led by central banks. By developing these new digital currencies, banks aim to increase their efficiency, while reducing the risk of financial crime against their accounts. Similarly, at the end of 2019, the European Central Bank put together a force of experts tasked with studying the potential of CBDCs. ECB president, Christine Lagarde, has stated that the ECB will assess the benefits of CBDCs, with a focus on ensuring that the public will have access to the central bank’s money.
Advancements in Australia
Since the COVID-19 pandemic began, countries across the world have seen a rise in digital payments and a dramatic decrease in cash use. At the same time, Central Bank Digital Currencies (CBDCs) are emerging at a fast rate.
Pandemic drives banks towards digital currencies
Lockdowns, which have limited the possibility of physical interactions, have also limited the use of cash payments as hygiene concerns around using cash have grown in many countries. With research finding that COVID-19 can live on some surfaces for up to 24 hours, it’s easy to see why the use of paper money and coins in everyday transactions has decreased.
Even though the use of digital currency is not yet a mainstream phenomenon, digital currencies are a growing component of the Australian financial system. The Reserve Bank of Australia recently confirmed that it is exploring the use of digital currencies within its own systems to use in bank-to-bank transactions.
With the way digital technology is progressing, it seems digital currencies may not be the only currency you use in the future, but they’ll certainly be a part of everyday life.