What Could Be the Innovation to Come From COVID-19?
Last month I gave a short overview of some innovations that have arisen from times of crisis. But what could be the innovation to come from COVID-19?
Perhaps we can start by looking at the problems that have recently surfaced. Many small businesses in Europe and the US are at risk because they do not have enough runway money that lasts further than a month. In response, the UK announced the CBILS scheme and in the US small businesses have been allocated a total of $350 billion. In France, hardship grants of up to €1,500 a month have been made available to small business owners. However, central banks either cannot administer this funding fast enough or look to pay a third party to do so.
Central Bank Digital Currencies (CBDCs) could be just the solution needed to bring efficiency with the transfer of value. The usage of a common infrastructure would enable the rapid dissemination of helicopter money and stimulus packages, not to mention the huge knock on effects for capital markets too.
Digital currencies are gaining momentum, too. Since the outbreak, there have been some major movements from governments regarding CBDC adoption:
- 24 March: China completes basic function of ‘top priority’ digital Yuan
- 29th March: Digital Dollar mentioned in three bills in the US
- 1st April: Banque de France begins experimenting with digital euro
- 6th April: Deutsche Bank encourages CBDC developments
- 6th April: South Korea central bank plans to pilot CBDC
- 21st April: Dutch Central Bank wants to do a CBDC trial
- 11 May: European Central Bank steps up CBDC efforts
Exactly when CBDCs will be in common use is unclear, but it’s becoming more and more obvious that the race between major global economies is ramping up. COVID-19 could be just the crisis CBDCs need.
This is a summary of an article I published on our blog, click here to read the full post.