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China’s quest to dethrone $$$ as the world’s
reserve currency will rely on digital yuan denominations.
The People’s Bank of China, which is piloting the
Digital Currency Electronic Payment (DC/EP), recently said it’s processed
more than 1.1 billion yuan (over $160 million) across 3.1+ million
transactions. And since trials began earlier this year, the PBOC has
disbursed over 113,000 personal digital wallets and 8,000+ corporate
ones.
Growth phase
On Friday, Chinese officials announced a giveaway
of 10 million digital yuan (~$1.5 million) to 50,000 Shenzhen residents.
The lucky winners received access to the Digital RMB app and could spend
the money at over 3,000 participating shops.
Immediate reactions: 1) Nice user acquisition
strategy you got there 2) Choosing the bustling tech hub of Shenzhen for
scaled-up DC/EP trials probably wasn’t coincidental.
Rest of world =
jelly
If China’s on second base, others are just stepping
up to the plate.
Yesterday, the G20 said it’s working
with the IMF, World Bank, and Bank for International Settlements to create
guidance for central bank digital currencies (CBDCs). As the
international f’nance dream team studies stablecoins and the like,
countries are considering their own projects.
- For
example: Japan will start CBDC
trials at some point next year.
And Libra, the Facebook nation-state’s stab at
stablecoins, faces formidable regulatory resistance. FB has pared down
Libra launch plans, but it wasn’t enough. G7 leaders say they’ll oppose
the launch of the coin until it’s properly regulated.
Back to DC/EP—it could be many things wrapped
in one:
- A
tech-enabled scheme to wrest financial control from the West, and,
potentially, Alibaba and Tencent.
- A
grim reaper for cash.
- A
tool to police financial transactions and monitor/surveil economic
activity (DC/EP ≠ cryptocurrency).
- A
proof of concept for the rest of the world.
But none of that happens overnight. DC/EP pilots
are scheduled to run through 2022, and by then, other countries could be
launching their own digital payment rails.
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