Digital currency, like Bitcoin, CBDCs or stablecoins, will get a boost from the COVID-19 pandemic, according to a survey by the Economist Intelligence Unit (EIU). The report, conducted during January and February, was sponsored by crypto.com.
The EIU consulted with Eva Julin, deputy head general secretariat at Sveriges Riksbank (Sweden’s Central Bank), who is leading the bank’s evaluation of issuing a digital currency. Antony Lewis, Fintech advisor to The Securities and Futures Commission (SFC) of Hong Kong was also consulted.
The survey claims that digital currencies showed the most growth opportunity for payments:
- 20% of people said they don’t currently use them but plan to in the next year, higher than any other payment method studied in the research, a trend that may accelerate as a result of Covid-19.
- 34% of respondents considered online payments to be digital currency’s main function, while only 24% cited “short-term investment” as a reason for its use.
- 54% of respondents said they would consider a digital currency issued by their government (a Central Bank Digital Currency or CBDC) trustworthy, compared to only 26% who said the same about currently available cryptocurrencies;
- however, cryptocurrency was the most recognised type of digital currency in the study.
- 10% of respondents believe their own country is already cashless (defined as predominantly using digital instead of physical payment methods).
- A whopping 85% of survey respondents of global consumers have owned, used or heard of decentralised digital currency such as a cryptocurrency.
- In the developing world, awareness of digital currencies has reached 92%.
The government issuance of a digital currency may alter the equation.
“CBDCs are very different beasts,” says Lewis. “CBDCs are the least risky form of electronic payment,” even though a publicly available one doesn’t yet exist.
“We see people want digital payments and we have to follow this trend,” Julin says. The Swedish Central Bank launched an initiative in 2017 to evaluate potential for introducing the e-krona.
“It is important that the government remains in the market to ensure equal access to a trusted payment option,” adds Julin.
She believes CBDCs decrease financial vulnerabilities in society and can act as supplements to physical cash.
Sweden may be an outlier but it’s not entirely alone: other central banks are considering following suit.
In January this year, the World Economic Forum (WEF) announced a global consortium to develop governance frameworks for digital currencies. The International Telecommunications Union (ITU), a UN agency, also established a focus group on digital currency in 2017.
The authors posit that Coronavirus concerns, a virus that spreads aggressively by touch and is airborne, has increased concerns regarding physical cash as a vector to spread the virus. The report adds that societies across the world were already leaning toward cashless options for daily purchases, based on convenience and traceability reasons.
Jason Wincuinas who led the research by EIU admitted that COVID-19 was not part of the original parameters of the survey since it really did not exist at the time of correlating the data:
“But we can see in events since the survey finished in February—such as [the] debate in the US congress over introducing a ‘digital dollar’ in recent weeks—that this is becoming a structural concern for society. What’s interesting is how China and Sweden were already looking at digital currency as potential pillars of their monetary systems. For other countries, maybe it takes an emergency like covid-19 to move the needle,” said Wincuinas.
The data indicate that physical credit/debt cards remain the most popular form of payments. Cash was in 3rd place.
Online banking, payment services and mobile apps (like Apple Pay, Venmo etc.) are growing in utilization.
Digital currencies like Bitcoin, Ether, XRP, etc, were still the least cited option but they captured the largest share of respondents who said they planned to try it within the next 12 months.
Wincuinas said the trend toward cashless payments is an “irresistible force.”
“And it was very interesting to observe greater eagerness and expectations within the developing economies we tested. Given that these countries also tend to have higher rates of people using mobile devices to go online and younger populations—who also tend to have faster takeup of technology generally—it could be a harbinger of what’s to come with digital currencies. Combined with the fact that we saw more resistance to cryptocurrencies and digital payments in developed economies, I think it’s clear there could be another leap-frog effect in the waiting as economies like China push ahead with digital ways to pay, and economies with older payment infrastructures play a wait-and-see game. But COVID-19 could change everything.”
EIU-Crypto-Digimentality The Economist 2020