Will the current crisis accelerate the end of paper money?

Analytics firm says that a growing cohort of central banks is weighing their own digital currencies

Will the current crisis accelerate the end of paper money?
Steve Randall

Virus contamination is now part of a list of potential drivers towards scrapping paper money and moving to digital currencies according to a global cryptocurrency intelligence firm.

CipherTrace says that the COVID-19 pandemic adds to the reasons why many central banks are piloting or considering their own digital currencies.

A greater driver is the growth of company-issued stablecoins and government-backed digital currencies such as China’s digital yuan. With around 38 nations already taking early steps, other central banks don’t want to be left behind in the digital revolution.

"In a post-COVID-19 world, digital currencies provide an opportunity to replace the exchange at grocery stores, and hundreds of other kinds of consumer businesses, of paper and metal coins from person to person with a virtual currency,” said Dave Jevans, CEO of CipherTrace. “Central banks must digitize their currencies to avoid virus contamination, reduce fraud, detect tax evasion, and protect against money laundering while managing inflation and competing against the digital currencies of privately issued stablecoins and other sovereign nation digital currencies."

Becoming mainstream
Jevans’ firm has launched a CBDB (Central Bank Digital Currencies) Initiative to help ensure that digital currencies are secure, private, and clean of illicit finance, including money laundering, terrorist financing, and sanction evasion.

He predicts that most central banks will provide a digital currency to their citizens in the next five years.

“As the digital economy becomes increasingly synonymous with the global economy, the need to modernize our financial system is that much more palpable,” said Dave Jevans. “Due to the accessibility and efficiency enabled by transacting in digital currencies, it’s only a matter of time before every country will be developing a CBDC. We want to ensure that these currencies are secure, private, and clean so that the transition to CBDCs is seamless for governments, banks, businesses, and individuals.”