COVID-19, the infamous corona virus, is an out of control beast rampaging through nearly every country in the world. From cities to whole countries, governments are clamping down, businesses and markets are closed down, with only essential ones being physically open. Going full digital and home delivery is the only alternative. The conditions are forcing people, consumers and businesses, to rethink on the use of physical currency.
Is Paper Money Bad?
The corona virus seems to move with direct contact of infected people, or through a medium that the infected person has handled. A paper and cloth based traditional currency note passes through hundreds of hands through its life. Untraceable, there is no way to know what the hands that hold are carrying. Indeed, these notes are a breeding ground for a jungle variety of germs, microbes and carriers of viruses.
Yet, there are not many reports that say paper money being a big contributor to the spread of the virus. The Federal Reserve has clarified,
Currently, the Centers for Disease Control (CDC) has determined that COVID-19 spreads mainly through person-to-person contact.
On the other hand, the central bank does have a plan in place to destroy any suspected dirty bills, if it ever comes to that.
China, where the virus originated from, has actually implementeda money laundering scheme (pun intended). The People’s Bank of China had ordered sterilization of suspected contaminated bank notes and new printed ones were put in a two-week isolation before being distributed. The South Koreans have also followed their neighbors.
The Bankers’ Opinion
In times of financial crisis, it is understandable that people tend to withdraw their money and store it in the form of cash in their homes, but the COVID19 does not seem to effect banks much. FDIC, the Federal Deposit Insurance Corporation, is actually encouraging people to trust in the banking system and advising to keep their money in their accounts. Jelena McWilliams, the Chairperson of FDIC, said, “The last thing that you should be doing is pulling your money out of the banks now, thinking it’s going to be safer someplace else.”Yet, FDIC understands that there are times when paper money is required by people to purchase items and has askedthe banks it covers to raise the limits on ATM withdrawals.
IMF officials also advise that people should put their faith in banks. According to Tobias Adrian, the Director of IMF’s Monetary and Capital Markets Department,
Cash, the physical object, is now potentially contagious but cash, the financial asset, is still a safe option,
Though the global market is seeing heavy impact of the isolation and quarantine of people and shutdown of businesses, this time there is one little (yet key) difference that previous financial crisis did not have: The world is a lot more digital. Credit and debit cards, online shopping and the use of digital payment systems are at an all time high. The economy is seeing a downturn in all countries, but since it is not a crash of businesses and markets, the money is safe.
Stay home, stay safe.