ZURICH: The coronavirus crisis is likely to speed up the development of central bank digital currencies, the Bank for International Settlements (BIS) said in an except of its annual report released on Wednesday.
Due to physical distancing measures imposed in many countries, contactless payment methods have boomed, said the international financial institution which brings world central banks together.
Meanwhile store shutdowns have led to a boost in e-commerce.
While the use of coins and banknotes has decreased, holding cash as a precaution has nonetheless increased in come countries, as was seen during the 2008-2009 financial crisis and the turn of the millennium.
"The COVID-19 crisis, and the attendant rise of electronic payments, are likely to boost CBDC (central bank digital currency) development across the globe," the BIS said a chapter on central banks and payments in the digital era, released ahead of its full annual report due out on June 30.
Established in Basel in Switzerland in 1930, the BIS is owned by 62 central banks, representing countries accounting for about 95 percent of global gross domestic product.
"Central banks, as guardians of the safety and integrity of the payment system, must keep evolving to meet the challenge of rapidly accelerating digital innovation," the BIS said in its report.
It said changes were generating interest in CBDCs, which deserved consideration as additional means of payment.
The COVID-19 pandemic has highlighted shortcomings in payment systems, especially for the poor and unbanked, it added.
With the rise of cryptocurrencies, a handful of central banks have looked into the idea of launching digital versions of their own currencies.
"Central banks around the world are stepping up their efforts to study CBDCs and, whether wholesale or retail, the goal is to create safe and reliable settlement instruments for transacting in the digital economy," said Benoit Coeure, head of the BIS Innovation Hub.
Hyun Song Shin, the BIS head of research, added: "As innovations increasingly emerge from outside the traditional two-tier structure provided by central banks and commercial banks, it is essential that policymakers meet the challenges of these new innovations to maintain the integrity of the payment system.
"While the private sector is well placed to draw on ingenuity and creativity to serve customers better, this is best done on solid central bank foundations."
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