The coronavirus pandemic has impacted the lives of everybody around the globe and has killed more than two million people. As a result of government measures, the global economy had to suffer, experiencing a downturn. Central banks started printing money to inject it back into the system to prop up asset prices.
Some of the trends noticed during the pandemic already existed but were accelerated throughout this time, such as working from home, distrust in governments, and crypto holders. The Robinhood GameStop incident just added fuel to that.
Decentralization Is the Future
The financial system currently put in place is now disrupted by the concept of decentralized finance. The new generation wants things that are fast, global, and seamless.
As technology forecaster Balaji Srinivasan commented, we already enjoy music, movies, books, and games in digital form. The next stop is clearly digital finance: “Regulations have slowed the advance of the internet into finance, healthcare, education but they can’t stop it. And smart states will adopt it.”
Contactless Payments
Banknotes can carry the virus on them, as the World Health Organization confirmed.
Yang Dong, Director of Blockchain Research at China’s Renmin University, believes that it’s a clear sign to start rolling out the digital yuan.
“Institutions and individuals will be more inclined to use non-direct contact transaction media including digital currencies in a short period of time, and this tendency will quickly form a user stickiness. Digital currencies will use this as an opportunity to accelerate Its distribution and application,” declared Dong.
An Inflection Point
Many transactions in China have already gone the digital way thanks to AliPay or WeChat Pay. In places like the U.S. or Hungary, banknotes have also experienced a 14-day quarantine. If this trend continues and physical cash becomes less and less popular, this will only benefit companies such as PayPal or those that issue cards.
PayPal Supports Crypto
In October 2020, PayPal came out to officially announce that it would host a new service that would let people buy and sell digital assets. PayPal explained: “The migration toward digital payments and digital representations of value continues to accelerate, driven by the COVID-19 pandemic and the increased interest in digital currencies from central banks and consumers.”
The CEO of PayPal, Daniel H. Schulman, agrees that moving toward digital currencies is the future as you get benefits that you can’t get from traditional finances, such as efficiency and speed or the government’s ability to disburse funds faster. Mizuno analyst Dan Dolev mentioned that “PayPal recently said that 50% of its crypto users are opening the PayPal app daily.”
The Focus on CBDC
Some governments responded to these changes by focusing on creating their own CBDC, which would be the start of a new era in the world’s economy.
Agustín Casterns commented: “the Covid-19 pandemic may have further accelerated the pace of digital change.” Still, while he spoke about CBDCs, he also criticized Bitcoin, which he sees as “more of a speculative asset than money.”