How the COVID-19 Pandemic is Fast-Tracking the use of Cryptocurrencies

05 May, 2020

COVID-19 has highlighted a shortcoming of fiat currency, which is likely to accelerate the transition to digital currency.

Banknotes, whether made of paper, polymer, or cotton and linen as in the case of the US dollar, can act as an agent of transmission for the Coronavirus. The World Health Organization (WHO) confirmed this claim in their recent press briefing, and in a study from Germany which established that Coronavirus could survive on notes, coins, and the plastic exteriors of ATMs for many days.

Yang Dong, the Director of Blockchain Research at China's Renmin University, strongly feels that this is the right time for China to launch its digital yuan.

An infection point for digital currencies

Most transactions in the People's Republic of China are already done digitally using WeChat Pay or AliPay. However, the "social governance" aspects of a government-issued digital currency - which might intertwine with the social credit system - could be beneficial for keeping tabs on quarantined citizens.

For the rest of the world, the need to improve personal hygiene makes cryptocurrencies an attractive proposition.

As the virus has taken root, and governments continue to place their citizens under lockdown, physical currencies have followed suit. Paper notes have been disinfected with ultraviolet light and high-temperature ovens in China and set in a 14 day quarantine period in regions as far Hungary and the US.

If the trend persists and stimulates pervasive dislike for physical currencies, the credit card sector is likely to thrive, along with payment companies like PayPal, and card-issuing banks.

On the other hand, if authorities recognise the chance to put tighter measures over the economy, governments could be prompted to release their own central bank virtual currencies. Then, we will experience a new era of economic experimentation as governments tighten the reins around money than ever before to wade through detested financial measures, such as quantitative easing and negative interest rates.

For cryptocurrencies, this would be the first real test of an alternative financial system established on sсepticism of financial institutions.