The coronavirus pandemic has given a boost to all things digital and came as a slap in the face of the analog society. But whether this will suffice to revolutionize the established global currency and make the world cashless has yet to be seen.

Amazon, Apple, Google, Facebook, Microsoft as well as Visa and Mastercard: tech giants and credit card firms have overtaken and left behind the big banks and industrial conglomerates in terms of market capitalization. Apart from the drug making industry, tech and cashless payment firms have been the big winners of the pandemic. Their systems and solutions are in high demand particularly due to the lockdown enforced by most states.

Even in countries such as Switzerland, where the use of cash is still a common phenomenon, digital payments increased substantially, because shops urged consumers to avoid cash in a bid to minimize physical contact.

Elsewhere, cash has already been forced way back by digital payment means, with Sweden the much-cited spearhead. Despite protests from pensioner groups, there is no stopping this development: Nordea, one of the Nordic countries' banking giants, will cease its cash handling in Swedish branches from this summer and refer clients to cashpoints, as newspaper «Dagens Nyheter» reported on Wednesday.

Easy to Use and Universally Accepted

Back in Switzerland, after the first steps out of the lockdown, the use of cash remained significantly lower than before the crisis began, according to data provided by Raiffeisen. Paying by card or smartphone may be here to stay.

Of course, it always seemed obvious that the contactless payments were going to gain among consumers because they are easy to use and universally accepted. But this is not the key issue in this story from the point of view of central banks and states.

Concerned About Loss of Power

Things could become nasty however if a completely new currency were to become the accepted global means of payment. The worry is that this would wrench the key instrument for monetary policy from the hands of central banks. The control over your currency and rate of interest, after all, is what makes states and central banks so powerful.

That's also why the Swiss authorities reacted disapprovingly when the Libra Association, the Facebook offspring, applied for a license as payment system. Only when the association filed another, adjusted project in April, at the height of the corona-outbreak in Switzerland, did the banking regulator (Finma) initiates its licensing process. The key difference between the two projects is that the new filing envisages the introduction of a stable coin based on one currency only and no longer on a basket of several currencies.

Keeping Mighty Chinese Tech Firms Under Control

In this context, it was with much interest that the plans of the Chinese central bank to launch its own digital currency were studied. The new product, a digital yuan, will be made available to banks in a first step in a city close to Shanghai, as «NZZ» reported. In a second step, ordinary citizens will be allowed to download the currency onto their smartphones and used it to pay for goods and services.

The Chinese central bank evidently hopes to keep tabs on the mighty domestic tech giants Alipay and Tencent and to prevent the launch of the Libra with its own solution.

Swiss Solution for Banking Community

With the digital yuan, the Chinese go a significant step further than the Swiss National Bank (SNB) intends to do. It has a group of experts pouring of the introduction of a digital currency, as finews.com reported about. But this product will unlikely be offered to Swiss consumers, but only to the financial market as a means to make it work more efficiently, as Andréa Maechler, member of the SNB's directorate, recently confirmed. The bank wants to avoid under all circumstances to upset the traditional dual banking system and to be thrust into the role of a commercial bank.

It remains a question whether the SNB will be able to hold out. Or, more to the point, whether a new supranational solution will become the accepted tool among consumers, very much in line with the Facebook project. A currency in other words, that combines the might of Amazon, Facebook, Google and Apple, the companies with the biggest market cap.

Will the Swiss Retain Their Love for Cash?

Such a giant new solution would put an equally big question mark over many trusted structures in Switzerland. For instance in banking, where companies for centuries have relied on a strong and stable franc. And over the Swiss decision to go it alone, which caused such a big headache for the SNB in recent years (the bloated balance sheet being the keyword). And, last but not least, the Swiss love for cash.

It is this slightly anarchistic trait of the Swiss that led to quite a few conflicts in the past. Cash is easily stored in big amounts at no cost (ignoring the rate of inflation) and nobody will know about it. Digital currencies, by contrast, are a dream come true for tax authorities. Even gold can't replace cash adequately for secrecy purposes, because the precious metal fluctuates fairly widely over time, the trading of it is incurring substantial costs and is not as readily available.

The trend to digital payment systems and a global currency solution has gathered pace during the pandemic. But opposition to a global alternative currency will stay strong among state actors and they know concerned citizens with substantial piles of cash behind them.