The Paradoxical Development of the Usage of Cash During the Pandemic: Part II

The acceleration of the paradoxical cash developments during the ongoing pandemic, namely the decline in cash usage at point of sale accompanied by surge in cash holdings, was addressed in the June issue of Currency News. The occurrence of the cash paradox itself is not a surprise – the Norges Bank was already paying attention 20 years ago ¹. However, the astonishing fact was that the use of banknotes as a store of value reached record growth rates, simultaneously as their use in transactions decreased significantly as traditional brick and mortar store closed and online commerce boomed.

The most striking factor in these developments is the global trust in banknotes during the pandemic. Crisis situations and other uncertainties are often reflected in the demand for the internationally used currencies like the US dollar or euro. In 2020 the banknotes-in-circulation growth rates were very high even in the case of currencies which have had a poor record regarding the stability of their value.