Deutsche Bank: In the long run, CBDCs will supplant cash

The COVID-19 pandemic has accelerated the ‘digital money revolution’, the long-term consequence of which will be the replacement of cash by national digital currencies (CBDCs). This view was expressed by Deutsche Bank analysts in a report on current challenges.

Deutsche Bank has urged European authorities to accelerate the development of CBDCs. They believe that, in the current geopolitical environment, this step will strengthen the euro.

“Widespread lockdowns and social distancing measures have driven a shift toward card payments over cash. In response, companies and policymakers should develop alternatives to cashless payment methods and remove intermediary fees. The priority should be given to regional digital payment systems,” the analysts say.

According to Deutsche Bank, lagging in the digital-currency race in light of China’s progress and Sweden’s advances in the field could prompt early adopters to embrace CBDCs.

“If other countries do not catch up with the leaders, they may find that national companies are forced to accept CBDCs and standards from other countries as payment methods,” the experts explain.

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Earlier in November, ECB President Christine Lagarde announced a survey into a digital euro for EU residents.

The central banks of the Bahamas and Cambodia have already issued national digital currencies.

The head of the Swedish central bank urged Parliament to grant the developing digital krona the status of a means of payment.

The United States has taken a cautious approach to issuing CBDCs. Federal Reserve Chair Jerome Powell stressed that for the United States it is important not to rush ahead of others in issuing a digital currency, but to do it right. A similar stance is held in Russia. Regulators in the United Kingdom, Japan, Korea, Canada, Australia, and New Zealand are likewise not ready to take on a leadership role.

In October, the Bank for International Settlements and seven central banks defined the foundational principles and key characteristics of central bank digital currencies.

China, among the leading economies, intends to take an active position in the development of international CBDC regulation.

For more on how and why central banks create digital currencies, read ForkLog.

“How and why central banks create central bank digital currencies (CBDC)”

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