China is making every effort to promote the digital currency it supports. Although it may be the first major economy to issue digital currencies, it is unlikely to be the last.
Russia, Iran and the United Kingdom have revealed that they are seriously studying this area. Countries around the world have begun to view the central bank's digital currency as a viable alternative to cryptocurrency, a check and balance of the dominant position of the dollar, and a late step toward a more efficient digital world.
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At the same time, the US dollar is the most stable and most traded currency in the world, but it rarely speaks on this topic. Why? (Note: Yesterday, the Fed chairman rarely uttered a voice on the central bank’s digital currency , saying the agency is conducting small-scale research.)
This article outlines the progress made in some countries' digital currencies, beginning with the world's major economies.
As early as five or six years ago, China was considering launching a digital currency supported by the People's Bank of China (PBoC). But many people think that Facebook Libra has convince China to take further action.
On October 28, Huang Qifan, vice chairman of China International Economic Exchange Center, said:
“The People’s Bank of China has been studying DC/EP for five or six years, and I think it has matured. The People’s Bank of China is probably the first central bank in the world to launch digital currency.”
Huang Qifan revealed that DC/EP is not a digitization of the existing currency, but a replacement for M0 (ie, cash in circulation). “The design of the central bank’s digital currency maintains the attributes and main features of the cash, and also meets the needs of portability and anonymity. It is a good tool to replace cash."
Since February 2018, Iran has been hoping to introduce national cryptocurrencies worldwide.
But the latest details about its gold-backed cryptocurrency program suggest that it will be run by a small consortium of Iranian private technology companies. Shahab Javanmardi, CEO of Iranian IT company FANAP, also said that the new encryption technology will use Iran's cheap power supply to achieve "the best use of frozen resources in Iranian banks." In other words, the lifting of US sanctions is a major incentive.
Russia’s own digital money plan is currently under consideration – at least it is.
Russian President Vladimir Putin’s optimistic remarks show that as US sanctions have caused Russia’s dollar assets to shrink, “the world will look for alternative savings and trading methods.”
Most importantly, Russia is unlikely to show the trump card in its hands, unless its plan is strong enough, its enemies can do nothing.
On Tuesday, the Bank of Japan Governor announced that the central bank is studying digital currency, but there is currently no release plan.
The Bank of Japan seems to be most worried about the impact of digital currency on commercial banks and the erosion of credit channels in commercial banks, which will have a negative impact on the economy.
In May 2018, the Bank of England published its first work report on the study of national cryptocurrencies. However, although it lists three possible models, most of the research addresses the risks of these three methods.
Since then, although Bank of England Governor Mark Carney has frequently made positive comments on the digital currency, little progress has been made.
Countries are very concerned about the central bank’s digital currency, except the United States.
From the small country of the Marshall Islands to the oil-rich UAE and Saudi Arabia, the idea of establishing its own digital currency has attracted the attention of all countries.
In fact, according to a report released by the Bank for International Settlements (BIS) earlier this year, 60 central banks and as many as 70% of financial institutions around the world are studying the central bank's digital currency.
Senegal and Venezuela, the most serious currency issue, have launched their own digital currency. Some countries, such as the United Arab Emirates, Saudi Arabia, Thailand and Singapore, have piloted digital currencies and are ready to launch them as soon as possible. At the same time, some central banks have made it clear that they will not continue to explore a digital currency supported by the government.
Among them are the US central bank. The Fed does not want to participate in the national cryptocurrency. At least this was its position in December 2018, when officials claimed that government-backed digital currencies were too vulnerable to price volatility, vulnerable to hacking and money laundering, and could not provide viable value storage.
Yesterday, the Fed chairman’s views on the central bank’s digital currency were not positive:
“If the purpose of CBDC (Central Bank Digital Currency) is to achieve transparency in finance and provide protection against illegal activities, it is conceivable that a generic CBDC may require the Fed to maintain a continuous record of all payment data using such digital currency, This sometimes leads to data privacy and information security."
Instead, the agency recently revealed plans to establish a nationwide payment system dominated by the central bank in the United States. The goal of this hypothesis is to make payments faster, more efficient, and may outperform Bitcoin and other cryptocurrencies in performance. But the idea was slammed by experts, including former congressman who supported Bitcoin and former presidential candidate Ron Paul.
Proponents believe that in addition to improving currency transparency and efficiency, the national cryptocurrency allows the Fed to obtain unconventional tools such as negative interest rates.
In a recent study, the Policy Research Institute from Washington pointed out that national digital currencies issued by countries such as China, Russia or Iran, especially those linked to major commodities such as oil, may increase the implementation of sanctions. The report pointed out that Washington needs to "train professional knowledge and influence to lead this international cryptocurrency competition."
These views have been endorsed by some policy makers, such as the former International Monetary Fund (IMF) president, current European Central Bank (ECB) President Christine Lagarde, and IMF marketing department head Tobias Adrian. Both sides urged central banks to fully explore this option.
However, Adrian warned that although the government-backed digital currency has potential, it will also complicate monetary policy because the central bank will have to manage and monitor cash reserves. Creating a token economy may also cause commercial banks to lose their middleman status.
Therefore, although electronic money is increasingly providing many advantages for financial management and inclusion, it is clear that the Fed still chooses to stand by.