Will COVID-19 speed the transition to digital currency?
Banknotes, whether made of paper, polymer, or cotton and linen as is the case with U.S. dollar, can carry viruses. This was confirmed by the World Health Organization (WHO) in recent comments to The Telegraph, and in a study from Germany which found coronavirus can survive on notes, coins, and the plastic exteriors of ATMs for several days.
Yang Dong, Director of Blockchain Research at China's Renmin University, says this means it is time to roll out the digital yuan.
"Institutions and individuals will be more inclined to use non-direct contact transaction media including digital currencies in a short period of time, and this tendency will quickly form a user stickiness. Digital currencies will use this as an opportunity to accelerate Its distribution and application," said Dong in an interview with local newspaper China Daily.
An inflection point for virtual currency
Most transactions in China are already conducted digitally using WeChat Pay or AliPay. But as China-based blockchain consultant Robert Van Aert told Brave New Coin, the "social governance" aspects of a government virtual currency—which might feed into a social credit system—could prove helpful for keeping tabs on quarantined citizens.
In the rest of the world, the focus on improving personal hygiene makes virtual cash an attractive proposition.
As the virus has spread and citizens have been placed under lockdown, paper notes have followed. Banknotes have been disinfected with ultraviolet light and high-temperature ovens in China, and placed in a 14 day quarantine period in places as far afield as Hungary and the U.S.
If the trend continues and prompts widespread distaste for physical cash, the credit card industry is likely to benefit, along with payment firms like PayPal, and card-issuing banks.
On the other hand, if authorities recognise the opportunity to seize tighter control over the economy, governments could be galvanized into releasing their own central bank digital currencies. This would enable a new era of economic experimentation as governments tighten the reins around currency more than ever before to drive through unpopular economic measures like quantitative easing and negative interest rates.
For Bitcoin, this would be the first real test of an alternative financial system founded on scepticism of banks.
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Kieran Smith, Khareem Sudlow