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Adoption of cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) has soared during the ongoing coronavirus pandemic as people are increasingly using alternative payment options instead of cash. A recent report by a German banking giant is even predicting that central bank digital currencies, or CBDCs, will likely replace cash in the future.
This is the prediction made by a report from Deutsche Bank, Germany’s largest banking firm, according to Cointelegraph. On November 10, the financial institution published a study titled “What We Must Do to Rebuild,” where the bank said that the ongoing COVID-19 pandemic has accelerated the “digital cash revolution.”
“Worldwide lockdowns and social distancing measures have only increased the use of cards over cash,” Deutsche Bank wrote. “To respond, companies and policymakers must design alternatives to credit cards and remove middle man fees. For now, the priority must be on regional digital payment systems. In the long term, central bank digital currencies will replace cash.”
Deutsche Bank said that people were forced to use alternative payment options other than cash due to fears of the virus. “The handling of cash has come under much scrutiny during the pandemic as various studies have shown how viruses can stick to money for days or weeks,” the bank added. “Worldwide lockdowns and social distancing measures have only motivated the increased use of cards over cash.”
The study also warned of the dangers for countries that fall behind the CBDC race. “If other countries do not catch up, they may find that their companies are forced to adopt the digital currencies and policies of other countries as payment mediums,” Deutsche Bank said.
The bank acknowledged China and Sweden as leading the race as both countries have already piloted their CBDCs early this year. “They have three factors in common: (i) Both countries have for many years embraced digital payments; (ii) cash payments in both nations were declining well before covid; and (iii) their governments play a pivotal role in promoting and supporting a digital payments infrastructure,” Deutsche Bank explained.
The bank highlighted the need for the U.S. and Europe to catch up. However, the bank is also aware of the challenges countries must face in this area. “Leaders of advanced economies must overcome two key challenges if they want their populations to adopt a CBDC: low-interest rates and cultural/privacy norms,” the German bank added.
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