A New Payment and Settlement Infrastructure
The Bank of Korea said on April 5 that the spread of COVID-19 is likely to accelerate the issuance of digital currencies such as central bank digital currencies (CBDCs). Likewise, the Bank for International Settlements (BIS) pointed out that the appearance of highly resilient and accessible payment and settlement infrastructures run by central banks can speed up and those examples include CBDCs for micropayment.
In the United States, the Fed is giving some thought to CBDC issuance and some congresspersons are in favor of an economic stimulus plan based on digital dollar creation and quick money supply to individuals’ electronic wallets.
The Kenyan government, in the meantime, recently allowed the M-pesa service to increase its transaction limit and charge no fees on small transactions. The United Nations said that this measure would be very helpful for low-income people in the COVID-19 crisis.
The necessity of CBDC issuance also has to do with the ongoing trend of non-face-to-face and contactless payment rapidly replacing the use of cash in the wake of the pandemic. In the United States, more than 30 percent of consumers began to use NFC-based credit card and smartphone payment functions after the outbreak of the pandemic. In Germany, the ratio of non-face-to-face payment to the entire credit card payment recently topped 50 percent whereas the ratio had been less than 35 percent before the outbreak.