China Digital Currency:
In a push to dominate global financial technology. The Chinese government is aiming to roll out the world’s first state-backed digital currency. China Creates Its Own Digital Currency-CBDC 2021.
China’s new currency could set global standards for the use of national digital currencies. And give Beijing unprecedented visibility and control over domestic financial transactions.
The big Picture:
Rolling out a national digital currency offers several advantages.
Reducing System Risk: “The existing system is owned by private companies. Should Alipay or WeChat pay bankrupt. Which is extremely unlikely, it creates systematic risk,” Trivium China analyst Linghao Bao told CNBC. A government alternative would provide a layer of security.
China aims to launch the world’s first official digital currency https://t.co/mFVpkiresH— The Economist (@TheEconomist) April 30, 2020
Spurring Innovation: A state-backed digital currency could potentially provide a host. Of new opportunities for businesses, tech companies, and trade.
China Creates Its Own Digital Currency-CBDC 2021
But it isn’t just about efficiency and innovation. Chinese officials have made it clear that they view the digital currency as a key staging ground for global geopolitical competition, according to a January report by Yaya Fanusie and Emily Jin of the Center for a New American Security.
China digital currency: Shanghai, Hainan among regions added to e-yuan trials https://t.co/SMYQu4AwaM— SCMP News (@SCMPNews) April 13, 2021
“Fintech is the commanding heights of future global financial competition.” Chinese central bank vice-governor Fan Yifei said in November 2019. “Whoever grasps this advanced productive capability will possess. The strongest core competitiveness in finance.”
Cryptocurrencies like Bitcoin and Ethereum exist on a decentralized ledger. And are intended to skirt controls by governments or companies. The People’s Bank of China (PBOC).
In the hands of an authoritarian government. “Never before has a government ever had access to individual user transactions directly. Technology hasn’t allowed that,” Fanusie told Axios.
DCEP Internationalize Help:
Though DCEP could help internationalize the renminbi to a moderate degree. It’s unlikely to challenge the U.S. dollar any time soon.
But international DCEP transactions could bypass SWIFT. The most widely used international payments system, making it easier for people and governments to evade U.S. financial sanctions.