An acute shortage of coins has hit the United States in the wake of the Coronavirus-prompted reduction in cash purchases. This may open an opportunity for cryptocurrencies, which satisfy some unique demands that other digital payments, such as cards, are unable to fulfill.
The US Federal Reserve placed limitations on banks' requests for coins due to the shortage, which has been reported by numerous businesses. This has led to businesses requesting that customers pay in either exact change or via card, lessening options for cash-paying customers. This shortage likely resulted from the sharp decrease in cash purchases as many retail businesses shut down temporarily in response to the Coronavirus pandemic, pushing economic activity online where cash payments are not possible.
Coronavirus shortages add momentum to cashless push
The effects of the Coronavirus pandemic have only served to hasten continuing efforts to move to a post-cash world. PayPal CEO Daniel Shulman believes that the pandemic provided the "tipping point" to complete the global move to a cashless society, as more businesses are put under pressure to limit cash payments for health reasons in addition to convenience.
However, demand for cash remains high, and may even have increased this year. According to data from the Federal Reserve and the European Central Bank, circulating cash supply spiked in immediate response to shutdowns, showing popular demand for, and trust in, physical currency over banks during uncertain times.
Demand for physical cash's privacy and ease of use may flow to digital cash
A migration to digital payments may leave behind market demand that is unsatisfied by cashless payment options, creating a demand for cryptocurrencies for their cash-like qualities. Because of their trustless and peer-to-peer nature, cryptocurrency is not vulnerable to confiscation, insolvency, or other similar disruption which may limit customer access to their funds, and cannot have transactions restricted or blocked by outside third parties, similar to cash. Additionally, both cash and cryptocurrencies offer increased privacy over cards and payment apps, with no direct association between the funds and their user.
Several pending developments may prove promising for the prospect of cryptocurrency adoption for payments. First, Dash, a cryptocurrency designed for retail payments with instant transaction confirmations and additional optional privacy, released a new demo of the blockchain username registration process for Dash Platform, a platform currently on testnet which promises to deliver a sleek and user-friendly experience similar to that of modern payment apps. Once released to mainnet, Dash Platform will allow users to register human-readable usernames, add contacts, and seamlessly send and receive payments, potentially providing the missing link in wide adoption by delivering an unparalleled user experience at the protocol level.
Second, MasterCard announced today an expansion of its cryptocurrency program, accelerating the onboarding of partners for cryptocurrency-backed card programs. This promises to facilitate the spending of cryptocurrency in retail payments in an indirect, though streamlined, way, and more importantly signals a move towards wider cryptocurrency acceptance by some of the world's leading established payments companies.
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