Indeed, in that same LINK survey, 76% of respondents said that the Coronavirus crisis will affect their future cash use. Internationally, COVID-19 has also exacerbated challenges in sending remittances.7 And many countries, advanced and developing, has necessitated sharp increases in government to person payments – raising new challenges.8  4 LINK: Coronavirus Crisis means cash use down but UK still withdrawing £ from ATMs each week:  https://www.link.co.uk/about/news/coronavirus-cash-usage-data/ 5 See LINK article above. 6 ONS: Internet Sales as a percentage of total retail sales: https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j4mc/drsi 7 BBC News: Coronavirus: Migrants struggle to send money home: https://www.bbc.co.uk/news/business-52506797 8 World Bank blogs: Responding to crisis with digital payments for social protection: Short-term measures with long-term benefits: https://blogs.worldbank.org/voices/responding-crisis-digital-payments-social-protection-short-term-measures-long-term-benefits 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  The private sector is responding. Central banks and other regulators will need to respond too. All this – combined with regulatory changes9 has led to an explosion of innovation in payments. Given these challenges, safe forms of payments innovation are welcome. They could meet unfulfilled customer needs, widen access to financial services, lower costs, and facilitate better payments integration. Innovation could also support financial stability by increasing diversity in payment methods. And innovation could potentially address the longstanding challenges in international payments by making them less costly and cumbersome. But even though some new technology seems cutting edge, recent innovation has largely been focused on the ‘front’ or consumer-facing end, sitting on top of existing card or bank-to-bank payment systems.

Since the invention of the credit card in the 1950s, almost all payments by households and businesses in advanced economies have been made through one of four routes: cash, cheque, card or bank-to-bank. Most new innovation to date hasn’t changed that. Even when we tap our phone or watch on an ipad to pay – we’re still generally paying by either card or bank-to-bank transfer. But fintechs, and in some cases big technology firms, are now proposing to change this by using cryptoassets known as ‘stablecoins’ for transactions currently processed by retail or wholesale payments systems. The basic idea of a stablecoin is not dissimilar from a pegged currency. Early forms of cryptoassets such as Bitcoin have so far proved too volatile for widespread use in payments. ‘Stablecoins’ aim to address this by pegging themselves to a fiat currency or basket of fiat currencies. Most propose to maintain reserves or backing assets to defend this peg. While some stablecoins proposals are designed as investment products, most seek stability in pursuit of becoming a new way to pay for goods and services or make peer-to-peer transactions. Many propose to integrate into popular social media or online technology platforms. With this backdrop and an estimated 3 billion social media users worldwide, it’s not hard to imagine that some of these proposals could quickly reach significant scale. 9  including open banking reforms in the EU and the introduction of a payments competition regulator in the UK.