BIS: The new crown epidemic brings new inspiration to the central bank's digital currency design

The BIS Bulletins is a BIS publication that has just been launched since April 1. It publishes a review article written by BIS economists and publishes its views on banking, market and economic events under the current new crown epidemic. The above is a short and fast carrier. The latest issue of the bulletin published a review article by Auer and others: "New Crown, Cash and Future Payments", which expressed the following views on this recent hot topic.

1. Other payment tools can also spread viruses, and may be more serious than cash

Since the outbreak of the New Crown epidemic, cash has been an indispensable tool to help people through the crisis, or a helper to spread the virus. It has been arguing. Recently, due to the global expansion of the epidemic, it has become a popular topic among currency authorities, payment institutions, media and cryptocurrency communities The topic is manifested as the first is that the number of Internet searches for keywords such as "cash" and "virus" has reached a record high, far exceeding the number of people in some countries during the epidemic of swine flu, Middle East respiratory disease, and Ebola. The search volume of the vocabulary shows that the spread and influence of this epidemic are unprecedented. The second is that countries that use small denominations more often pay more attention to these keywords, reflecting the public's high concern about whether cash carries viruses. The third is that many central banks have taken various measures to deal with cash, to prevent the possibility of virus transmission through measures such as disinfection, isolation, and closing the circulation function of the access machine. At the same time, through various means of publicity and explanation, so that the public can use cash in peace.

But to eliminate the public's fear of cash-borne viruses, it is not only necessary to take these measures, but also to speak with scientifically tested data to be convincing. The article cites research by some scientists and found that it is admitted that banknotes and coins can carry pathogens including new coronavirus and can survive for many days. But the surface of other objects can also carry viruses, and viruses on smooth and non-porous materials are more likely to survive longer (see figure below). This discovery means that various bank cards and receiving terminals that use plastics, metals and other materials can also spread viruses, and because the viruses survive longer on the surface of these objects, the chance of infection to the public is likely to be greater. Therefore, no matter which payment tool is used, it is important to follow the guidance of the health and anti-epidemic agencies during the outbreak and develop good hygienic habits for hand washing. This is an effective measure to reduce the risk of virus transmission, not any of the existing The means of payment shall be disposed of.

The new crown epidemic brings new enlightenment to the central bank's digital currency design1 Source: BIS Briefing

2. The new crown epidemic may change the payment habits of the public, and the payment gap should be prevented

In the past crisis period, the public tended to increase cash holdings due to preventive psychology, but this crisis situation is special, it is a highly contagious, high mortality, large-scale outbreak epidemic, showing that it is not the same as in the past The situation is the same: some countries, such as the United States, which has become the epidemic storm center, have significantly increased cash in circulation; while the United Kingdom has shown a decline in cash withdrawal transactions.

The new crown epidemic brings new enlightenment to the central bank's digital currency design 2 Source: BIS Briefing

Auer believes that these differences may be related to the consumer behavior and payment habits of consumers in various countries. For example, the use of contactless card payments has increased before the epidemic. However, since the outbreak, people have increased concerns about physical contact. In view of the speed of this type of card payment application, such as contactless cards, because they do not need to contact the acceptance device to enter the password, they were only applicable to small transactions in the past. After the outbreak of the new crown epidemic, Austria, Germany, Hungary, Ireland, the Netherlands, the United Kingdom and other countries have increased the transaction limit for contactless payments.

However, national currency authorities and international organizations such as BIS worry that if the amount of cash used drops to a very small percentage of GDP like Sweden, it will not bring to the elderly users who have no bank account and will not use non-cash payment instruments. New unfairness? For example, the United States has nearly 20% of the population without bank accounts and no access to banking services, and there are 1.3 million similar people in the United Kingdom. In what way did the government pay financial assistance to these people during the epidemic? The proposals of the two parties in the US Congress have mentioned the establishment of a digital dollar wallet distribution plan, but it is helpless to be thirsty, and the central bank's digital currency cannot be achieved overnight. At present, it can only be paid directly (with tax records) and by sending cheques (with no tax records).

In fact, governments and central banks of various countries have taken many positive measures for cash to safeguard social equity and protect the rights of vulnerable groups. The central banks of the United Kingdom, Sweden, and Canada all joined the legislative bodies to call for the maintenance of cash use rights and require commercial banks to meet Customer cash needs. In recent years, the People's Bank of China has vigorously carried out cash rejection and rectification work, and regulated the selection and application of payment methods by social and economic subjects. The purpose is also to protect the legitimate rights and interests of the public and encourage the harmonious development of diverse payment methods. During the epidemic, while guaranteeing the normal operation of various payment instruments, the central banks of various countries are also striving to maintain the legal rights of cash users and avoid creating a new payment gap. The above scientific research also confirmed that the probability of infection caused by viruses carried by cash is not higher than that of other payment instruments. The epidemic should not be a reason to cancel the use of cash.

3. The new crown epidemic puts forward new requirements for the central bank's digital currency design

The disaster relief function of CBDC is rarely mentioned in the previous schemes. What is more talked about is its ability of emergency recovery in case of system failure or network disconnection. For cash, it emphasizes the advantage of not being dependent on the network or electricity during disasters. But this advantage cannot be played in the face of the plague. Auer and others believe that the new crown epidemic will have two effects on the development of future payment methods. First, the pandemic epidemic highlights the importance of central bank digital currency. Its design should take into account epidemics and cyber attacks. It is necessary to consider all people in the society, including those who do not have a bank account, and also to design a non-contact use method. Second, the current payment status of various countries during the epidemic also shows that the diversified payment methods coexist harmoniously and develop important values, because before encountering unknown threats, no one can determine which payment method is more flexible and convenient, and can better respond to this. Threat. So protecting the use of cash is as important as protecting other payment methods.