The Covid Coin: payment technologies in a post-pandemic world
Covid-19 is accelerating the discussions about digital currencies. Experts predict that the post-pandemic world will move very fast in payment technologies, but also warn central banks that they cannot afford to be passive bystanders and leave the infrastructure for payments to market forces.
Covid-19 is accelerating a number of trends that we have seen in recent years, such as working from home. The virus also has implications in the economic field and is said to accelerate the long-term shift away from cash. According to Kenneth Rogoff, this means that official discussions about digital currencies are heating up. Although it’s not an official term, Rogoff uses the idea of the “Covid Coin” in referring to these discussions.
Last month, the Group of Thirty – an independent global body comprised of economic and financial leaders from the public and private sectors and academia – published an extensive report on these issues entitled “Digital Currencies and Stablecoins: Risks, Opportunities, and Challenges Ahead”. The authors write that the potential for tokenization of payment systems using blockchain has reached a point where governments and financial authorities can no longer afford to be passive bystanders. The report hints at the crucial phase we are in by noting that “decisions taken by policymakers on digital currencies, now and over the next few years, could potentially shape the global financial system for decades to come”.
This implies that central banks and finance ministers should play an active leadership role in making sure that the public infrastructure for payments is not left to market forces alone (such as Facebook’s Libra or the redeemable platform currencies that Amazon or Alibaba might issue in the future). It also requires more experimentation and the introduction of multiple payment alternatives so that promising systems gain a measure of resilience. At the same time, as the payments systems becomes more digital, it is all the more important to find a balance between government interests and the protection of individual data.
These are all considerable challenges, but one thing is certain according to Rogoff: the post-pandemic world will move very fast in payment technologies and central banks cannot afford to play catch-up.
Author: Olivier Vonk