In a new report, Deutsche Bank called on Europe to accelerate the development of central bank digital currencies.
Deutsche Bank, Germany’s largest banking institution, is confident that the central bank’s digital currencies, CBDC, will replace cash in the future.
The bank’s research arm, Deutsche Bank Research, published a new report of economic estimates and proposals to help global economies affected by the coronavirus pandemic titled “What We Must Do to Rebuild,” on November 10.
In the report, Deutsche Bank claims that the current COVID-19 pandemic accelerated the “digital cash revolution”. According to the bank, this revolution will eventually allow CBDCs like China’s digital yuan or Sweden’s e-krona to replace cash in the long run.
Deutsche Bank called on national governments and private companies to work on alternatives to credit cards, stating:
“Global lockdowns and social distancing measures have only increased the use of cards rather than cash. To respond, businesses and legislators must design alternatives to credit cards and eliminate middleman fees. […] For now, the priority should be on regional digital payment systems. In the long term, central bank digital currencies will replace cash”.
Indicate payment platforms such as Swish, Alipay, and WeChat Pay as good role models
In the report, Deutsche Bank Research also said that many countries, such as the United States and European countries, lag behind CBDCs. He added that both Europe and the US remain much tied to cash:
“According to our survey, a third of Americans and Europeans ranked cash as their preferred payment method, and more than half of the people in developed countries believe that cash should always be close”.
He warned European and American policymakers about the risks of not developing their digital currency project in response to active progress by China and Sweden in the field. The bank argued that lagging behind other jurisdictions could force policy adoption by pioneers:
“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 means of payment.”
The bank asked Europe to develop a digital currency solution to strengthen the euro and in the existing geopolitical situation. “To do this, we must have a separate European payment solution,” wrote Deutsche Bank Research.
He compared the processes of Sweden and China, as first in the CBDC career. He says they have these factors in common:
- Both countries have adopted digital payment technology for many years;
- Cash payments in both nations were declining long before Covid-19;
- Their governments play a critical role in promoting and supporting a digital payments infrastructure.
It highlights that although both countries share these factors, each motivation is different when it comes to developing a CBDC: China explicitly established its digital currency to improve financial inclusion; while Sweden, which has a very high financial inclusion rate, pursues its CBDC directly as a next step; After all, Sweden already has one of the lowest cash payment rates in the world, about 1 percent of GDP.
By: Jenson Nuñez.