According to a new report from the Bank for International Settlements (BIS), in 2020, interest in the Central Bank’s cryptocurrencies has become higher than in Bitcoin and the Libra project.
In a new working paper, BIS analyzes the global state of research and development of government cryptocurrencies, technical approaches and government attitudes towards this initiative. The comprehensive study draws on more than 16,000 presentations from central bank officials in recent years and evaluates the existing designs of government cryptocurrencies and the motivations behind the adoption of the new model by various countries.
“Attitudes towards the question of whether central banks should issue cryptocurrencies have changed markedly over the past year,” the authors of the document write.
The study includes an analysis of public interest in government cryptocurrencies over time. According to BIS data, in 2020, users around the world were much more likely to search for information about government cryptocurrencies in search engines than about Bitcoin or Facebook’s Libra cryptocurrency.
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These findings support the report’s suggestion that while the concept of a state-owned cryptocurrency was proposed long ago, it wasn’t until 2020 that the initiative began to gain global attention. BIS offers several hypotheses as to why this happened. First, the organization points to Facebook’s announcement that the company plans to launch its own global cryptocurrency, Libra, and the subsequent public sector reaction in 2019 as a “tipping point.”
Additional data confirms this assumption: as of the end of 2019, “many of the largest central banks have indicated that they are likely to issue their own cryptocurrencies very soon.” Moreover, the share of central banks that can issue retail government cryptocurrencies in the medium term – the next 6 years – doubled in 2019.
According to the BIS analysis, the coronavirus pandemic has become a decisive factor accelerating developments in this area:
“Social distancing measures, public concerns about COVID-19 being transmitted through cash, and new payment schemes between government and individuals have further accelerated the transition to digital payments.”
The BIS report mentions the United States, where early versions of congressional fiscal stimulus bills called for a digital dollar to speed up the distribution of government aid to citizens. In the Netherlands, China and Sweden, central banks are prioritizing research work on government cryptocurrency development during the pandemic.
According to BIS, all of these factors may be enough to overcome the large momentum in the retail payments industry. However, there is a downside to the coin:
“When user behavior changes, it often happens very actively. Likewise, the change in payment behavior caused by the COVID-19 pandemic, such as the increased use of digital payments, could have far-reaching implications in the future”.
