The steps required to promote digital currencies
- Worldwide lockdowns and social distancing measures have only increased the use of cards over cash.
- The race is led by Sweden and China and both have started piloting e-currencies earlier this year.
- Although both countries share these common factors, they each have a distinct motivation for developing a CBDC. China explicitly set up its digital currency to improve financial inclusion. Sweden, which has a very high financial inclusion rate, is pursuing its CBDC simply as a natural next step; after all, Sweden already has one of the lowest cash payment rates in the world at about one per cent of GDP.
- It is imperative that the US and Europe catch up.
- To respond, companies and policymakers must design alternative 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.