Euro’s Dominance at Risk of Replacement by Digital Yuan in the Next Five Years: dGen Report

The Euro might be overtaken by China’s digital Yuan as soon as 2025 if the European Union will not have launched a CBDC by then, highlights the latest research report by German-domiciled think tank, dGen. This release which was published on September 9 focuses on the ramifications a major CBDC on the Eurozone as well as the potential of a digital Euro to be ahead of the pack.

As the crypto industry comes of age, regulators have found themselves at a cross-road in the creation of oversight mechanisms. Well, China which began research in this space as early as 2014 recently launched its digital yuan ‘DC/EP’, sparking a hype towards the global adoption of CBCD’s. Since then, a number of central banks including the European Union have floated the idea of piloting their own digital currencies.

The EU progress on CBDC’s has, however, been criticized by prominent contributors in Europe’s blockchain ecosystem including the Head of Frankfurt’s School Blockchain Center, Philipp Sandner,

‘[The] ECB’s reaction has been too slow. Especially, the benefits from a CBDC for the industry, e.g., based on programmable money, are currently neglected. Given Libra and the DC/EP, the ECB has to react quickly to keep its geopolitical position’.

According to the report, the launch of a digital Euro would be strategic for the region to continue its global dominance as the second most held fiat reserve; only this time a digital Euro will be used instead. Consequently, the research notes that a digital Euro has the potential to transform the global economy while acting as the fundamental pillar of a virtual monetary ecosystem in the Eurozone.

U.S Dollar Still Safe!

Unlike the Euro whose odds against the DC/EP are less favorable, dGen predicts that the digital yuan will not unseat the world’s reserve currency, at least not yet. The research highlights China’s political unrest as one of the factors that could hinder its CBDC’s global adoption at level to compete with the U.S dollar. In addition, smaller nations are more likely to adopt a digital dollar as opposed to the yuan given its already established dominance and ease of access globally. The research reads,

“In the coming decade, with the launch of a digital Dollar, digital Yuan, and digital Euro, we predict that smaller nations will take the path of least resistance, and opt for using and storing the digital Dollar.”

Global CBDC Integration Could Hit 60% in the next Decade

Other predictions made by the German think tank include the possibility of a 60% global CBDC integration by 2030. As per the dGen insights, three out of five nations will have completely replaced their fiat currencies with a central bank backed digital asset by then. On this front, China and Bahamas in the West Indies Caribbean have already set a pace based on the CBDC progress within the two jurisdictions.

Last but not least, the report predicted that CBDC’s will have to co-exist with private stablecoins which have now been in the crypto space for quite a while. This is because of their value proposition in the volatile cryptocurrency market as well as the ability to circumvent authorities through blockchain tech, regardless of their position when it comes to digital assets.

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Author: Edwin Munyui

Chinese Ride-Hailing Unicorn, Didi Chuxing, to Pilot Digital Yuan; First Mass Scale Use of DCEP

China’s ‘Uber,’ Didi Chuxing, will test run the digital yuan according to an announcement on July 8. The Chinese ride-hailing unicorn has over 500 million registered users and is optimistic that a ‘strategic partnership’ with the PBoC Digital Currency Research Institute will scale the DCEP adoption.

“Under PBOC’s overall DCEP strategy and operation timeline, DiDi’s DCEP taskforce will design and implement pilot DCEP projects following rigorous safety, security and governance standards.” read the announcement.

With only a few months of being in existence, the digital yuan pilot is already making a debut in China’s shared economy. This comes barely two months since it was first used to partially pay some state employees in pilot provinces. Now that the DCEP will be integrated with Didi Chuxing’s ecosystem, it might just be the beginning of a mass scale adoption as China looks to wipe out the fiat renminbi in circulation.

Notably, Didi Chuxing’s market muscle and financial position will be a big boost for the digital yuan. Currently, this ride-hailing service dominates the Chinese market with a valuation of $56 billion, operating across 400 cities. It also enjoys the backing of big tech like Apple, Softbank, Alibaba, and Tencent. While its value proposition goes a long way in the digital yuan roll out, Didi Chuxing noted that working with the PBoC is strategic for their fundamental goals as well,

“The partnership is a key milestone in DiDi’s ongoing initiatives to enhance the interconnectivity of online and offline economic sectors in China, as the government seeks to support the development of the real economy sectors with innovative financial services,”

China Setting Stage for the Digital Currency Economy

This development is no surprise, given the recent highlights of China’s digital yuan. As other countries continue with debates on adoption, China is miles ahead and could soon launch an official version of the DCEP. A former top executive of the PBoC recently said that the DCEP backend infrastructure is almost complete. However, no comments were made on an official launch date.

Looking at the ongoing works, this date could be sooner than most stakeholders expect. For starters, the digital yuan pilot is being facilitated by China’s banking and tech giants who have been tasked with digital wallet facilities, amongst other ecosystem functions. Also, major food chain retailers like Subway, Starbucks, and McDonald’s are reportedly looking to pilot China’s CBDC as well. Could this be finally sunrise for the project, which has been in the works since 2014? Well, the COVID-19 pandemic might just favor the odds as paradigm shifts to digital economies.

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Author: Edwin Munyui

Will China’s CBDC See Strong Adoption Or Will Dollar Pegged Stablecoins Cause Resistance?

China’s digital yuan is touted as a powerful challenger to the US’s global dollar dominance, but not as a direct competitor to cryptocurrencies. However, Chinese central bank digital currencies (CBDC) may find it hard to see adoption in niches where the dollar-pegged stablecoins already have a foothold, primarily Tether’s USDT.

Speaking during the Unitize panel held on Monday, Genesis Block’s Charles Yang, gave reasons why digital yuan might not be attractive as a crypto replacement.

Speaking to Bitcoin Exchange Guide, Yang explained that there are two main aspects driving crypto adoption in Asia. First, speculation, stating that there is a large number of investors particularly from China and Korea who like taking risks. In addition, Asian traders also enjoy the borderless nature of cryptos. He explained:

“Any country that has these capital constraints — Korea is a big one, China’s obviously another major one — [where] people just can’t go through regular banking channels to send money to a different country. This is the major use case of crypto right now.”

In this regard, Yang argues that a centralized as well as bank-issued digital yuan might not be a superb replacement to USDT. Yang states that the set regulations for capital control will still apply.

Yang also brought the issue of internationalization of CBDC’s and the way other nations may react. He explained that if China introduces a digital yuan within their own blockchain insisting other nations to accept it, those nations will need to access the data. Yang remains sceptical on whether the Chinese central bank will be ready to offer the data to other nations.

Yang stated that USDT will remain to be popular in Asia as lots of dollars are being traded each day. Traders’ confidence has been boosted in the recent past in regards to its reserves.

The expert opines that digital yuan will need to establish itself among bigger crypto markets as well as exchanges for it to compete with USDT.

Lack of adoption by other countries can also make it hard for the digital yuan to have a major threat to USDT.

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Author: Joseph Kibe

Former PBoC Vice-Chair Says the Backend Infrastructure for China’s Digital Yuan is Complete

China’s much anticipated Digital Yuan backend development is complete, according to Wang Zhongmin, the former Vice-Chair of the PBoC National Council for Social Security Fund. Wang made this announcement during the virtual 2020 FinTech Forum that was held by Beijing’s Fintech 50 Forum in collaboration with Tencent FinTech Research Institute.

The initiative, which began around five years ago, is in its sunrise phase following a pilot in 4 Chinese cities. Going forward, PBoC is optimistic about replacing the fiat renminbi (RMB) in circulation with a digital yuan.

It, therefore, follows that Wang’s sentiments could signal an earlier integration with China’s monetary system. Notably, China fast-tracked the development of its PBoC backed digital currency after Facebook announced Libra last year.

With crypto assets on the rise, China is looking to emerge as a leader in this space, hoping to replace the U.S dollar as the world’s reserve currency.

According to Wang, the digital yuan would not only serve as a digital base currency but also a payment ecosystem that accommodates other crypto-assets and sovereign currencies. Its integration is, therefore, expected to spur greater cooperation and competition in the digital currency space while maintaining oversight.

Also, the move towards a digital yuan is in line with measures against the spread of COVID-19. Wang was keen to note that both governments and private entities have since taken into consideration digital payment tech.

Other notable jurisdictions that have moved to support a CBDC include Italy; the country’s banking association (ABI) recently said that they are ready to take part in the piloting of a digital Euro.

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Author: Edwin Munyui

China’s Digital Yuan Set to ‘Displace’ Bitcoin and U.S Dollar; Report

China’s Digital Yuan could challenge the U.S dollar and Bitcoin, according to a recent report by Bloomberg.

The PBoC backed digital asset was piloted in April by the Agricultural Bank of China within four cities in the country. Since then, stakeholders across the world have voiced different sentiments, with some seeing it as a threat while others remain confident of the dollar’s supremacy in pricing commodities such as gold and oil.

Though still in its early stages, it is likely to be tested on a massive scale during the Beijing Olympics scheduled for 2022. The Chinese digital yuan is simply cash stored electronically as opposed to physically in wallets.

This is not a new concept for China’s population, given that payments via the likes of WeChat and Alipay contribute around 16% of the country’s total GDP. The introduction of a digital yuan would, therefore, disrupt this market while reducing risks according to PBoC governor, Yi Gian:

“Those big tech companies bring to us a lot of challenges and financial risks…You see: In this game, winners take all, so monopolies are a challenge.”

Basically, the digital yuan is backed by the PBoC, meaning that the regulator controls this ecosystem. While this is antithetical to the concept of decentralization, China began working on it as early as 2014 and accelerated the project last year when Facebook announced Libra.

Recent political meetings by China’s PPC and NPC also served to advance the CBDC agenda with a regional stablecoin proposition.

The Digital Yuan Threat

China’s move to launch a CBDC has been touted as a political strategy to dominate the emerging digital currency market, according to some. Andrew Polk, the co-founder of the Beijing based consulting firm, Trivium China, is among those convinced that PBoC saw an opportunity in this innovation:

“This has a very strong political will behind it…They see an opportunity of being a global leader here.”

However, not everyone thinks the digital yuan is set to change the current order; in which most assets are pegged to the U.S dollar. Henry Paulson, a former U.S treasury secretary, has echoed that China’s plans for its CBDC do not pose a serious threat for the U.S dollar; primarily because the dollar enjoys a high degree of trust globally.

A Way to Implement More Financial Oversight?

Though an easy way to bank the unbanked in China, the digital Yuan could be used to increase oversight within China’s financial ecosystem.

Ideally, the PBoC will be able to track funds within its CBDC network. Furthermore, this regulator could place limits on the amounts transacted or even require appointments for one to transact a large amount.

Skeptics are now saying that this innovation could be linked to the social-credit system which functions based on the behavior of a person; ‘whitelisted’ candidates can, therefore, get privileges.

Despite all the speculation, it will take longer before we finally see China’s CBDC rolled-out across its jurisdiction and the fate of cross-border transactions upon the official launch.

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Author: Edwin Munyui

Digital Yuan’s (DCEP) Ability to Dominate Cash Depends on 4 Keys: Former Bank of China Pres.

China is on the brink of launching its digital yuan for commercial use as the government has already started the pilot run a couple of weeks ago.

During the pilot run of the digital yuan or the DC/EP system, the government employees of 4 major cities were given digital yuan in the form of travel allowance to test how it would fare in the real world.

The pilot program was extended to 8 cities, and there were reports that the government has contacted fast-food giants like McDonald’s and Starbucks to test it as well.

The Chinese government, which begun its research into the digital yuan almost 5 years ago, proved adamant that the digital yuan would be a success.

Li Lihui, the former president of China’s Central Bank, The People’s Bank of China has revealed that he believes digital yuan’s launch can easily replace the current cash system if the digitized yuan meet 4 key conditions.

Lihui’s comments came during a live stream talk on People’s News on May 5th, when he discussed the significance of the much-hyped Central Bank Digital Currency or the digital yuan.

The former central bank president revealed the key reason for the success of the digital Yuan. That being its independent technical architecture, which unlike popular digital payment systems, like Alipay or WeChat, doesn’t have to be dependent on any third-party network or bank to confirm transactions.

Lihui went on to reveal that the 4 key conditions that would determine digital yuan’s success over traditional cash payment would be greater efficiency, lower transaction cost, people’s acceptance and enough economic scale with commercial value.

Li Believes There Are Different Forms of Digital Currencies

The former president of the central bank also noted that there are various forms of digital currencies, depending on what type of digital technology they are utilizing.

He categorized these digital currencies in three different forms, namely legal digital currencies (referring to Central Bank Digital Currencies or CBDCs), blockchain-based cryptocurrency, and trusted institution digital currency.

He further explained that decentralized currencies, like Bitcoin, allow for privacy and anonymous transactions. The digital yuan would be quite similar to that, however, the government would put a threshold on the amount of currency that could be sent anonymously by a user.

While the former president likened the digital yuan to Bitcoin in terms of functionality, in terms of underneath technology there is no similarity at all.

While many think digital currency is quite similar to decentralized currencies, the reality is far from it. The digital yuan would work on a hybrid ledger developed by AliPay and would be centralized in nature.

Many have even claimed that the main purpose of creating digital yuan was to control the flow of money in and out of China.

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Author: Lorraine Mburu

PBoC Secures $4.7M Funding for its Blockchain Trade Finance Platform From Chinese Govt

The People’s Bank of China (PBoC) has secured a funding of 32.5 million yuan ($4.7 million) for its blockchain trade finance platform for key research and development projects.

The country’s central bank has been spearheading this platform that was launched in Sept. 2018 in South China’s Guangdong Province. Now, it has acquired the funding that will be injected throughout the following 3 years, reported the Global Times Monday.

The funding will help the platform improve small and medium-sized enterprises (SMEs) so they can use a broader field of finance tools.

Currently, more than 40 banks and nearly 1900 companies are part of this platform which processed a total of 90 billion yuan ($12.5 billion) worth of transactions by December 2019.

The blockchain trade finance platform of PBoC is overseen by the central bank’s Digital Currency Research Lab, local banks, the Chinese Academy of Sciences, and major Chinese universities like Tsinghua University, per the media reports.

In November, in order to expand its trade finance business, the Hong Kong Monetary Authority signed an agreement with the central bank to connect its blockchain-based trade finance platform eTrade Connect with PBoC’s.

The platform has also reportedly improved the productivity of SME loan authorizations significantly while the time needed to prepare trade financing has been reduced from ten days to just about 20 minutes. Additionally, corporate financing expenditures have also declined to below 6%.

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Author: AnTy

People’s Bank of China Has Filed 84 Digital Payment Patents For CBDC’s: Report

According to the Chamber of Digital Commerce, China has filed 84 patents for the digital yuan, its new upcoming digital currency.

The patents date to 2017 and are credited to the People’s Bank of China’s (PBoC) Digital Currency Institute. They were filed to the Chinese Patent Office (SIPO) and indicate some important aspects like the one where the Chinese government is able to alter the currencies supply after some specific events like interest rates going up, or the one of integration with traditional bank accounts while the connection with digital currency chips cars or digital wallets is still possible.

The Chinese Government Will Track Down Transactions

The patent applications are related to the integration of the digital currency in the already existing banking infrastructure. This is what Mark Kaufman, the patent attorneys for Rimon Law and a former employee of the Chamber of Digital Commerce said about them:

“Virtually all of these patent applications relate to integrating a system of digital currency into the existing banking infrastructure.”

Meanwhile, the Chamber’s president, Perianne Boring, mentioned how a mechanism that’s able to stop the tracking of transaction by the Chinese government doesn’t exist yet.

Will Other Governments Take China’s Example?

In November 2019, Mu Changchun, the head of PBoC’s Digital Currency Institute, spoke at a Singapore conference and said:

“We are not seeking full control of the information of the general public.”

The newly filed patents come only to prove that the Chinese government is committed to issue a digital currency, which may convince other governments to take action in the same direction. For example, the Japanese government recently talked about China’s digital yuan and Facebook’s Libra, saying these should be combated with a digital currency released by Japan. Norihiro Nakayama, the foreign affairs parliamentary vice-president of Japan said,

“China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts.”

Will the US Release Its Own Digital Currency?

There have been signs that the US may be considering issuing its own digital currency too, as Jerome Powell, the Federal Reserve Chairman, said on Tuesday that this matter needs to have an answer and that:

“We’re working hard on it.”

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Author: Oana Ularu

China’s Digital Currency Still has No Launch Date But Will Continue its Development in 2020

  • Research and development of digital yuan to continue in 2020 – says PBOC
  • The central bank said it made “smooth progress” on the digital currency in 2019
  • The step to create a digital currency is taken to offset perceived risks presented by Bitcoin and Libra

China’s central bank said on Sunday that it doesn’t have a launch date for its sovereign digital currency but will continue with its research and development, as per the local reports.

A report in August said the central bank-backed digital currency could be launched as early as November but that is long gone.

Last month, Mu Changchun, the official in charge of its development said the “top-level design, formulation, functional research and testing” had been completed.

The People’s Bank of China also shared during the annual work conference held last week that it made “smooth progress” on the digital currency in 2019.

In December, Caijing, a Chinese business magazine reported that the country’s four big state banks — Bank of China, Agricultural Bank of China, China Construction Bank, and Industrial and Commercial Bank of China — and three state-owned telecom firms are involved in its development.

Recently, Mu also said that the sovereign digital currency was intended as a replacement for cash and not designed for speculation.

PBOC has been one of the first central banks to promote the idea of a CBCD. Last year, after Facebook announced plans for its own digital currency Libra, the bank’s research institute stepped up its development. The officials came out to the public and shared aspects of this upcoming digital currency that they said has been ready after five years of research.

Sweden is also working on an e-Krona while Bank of Japan governor would conduct “technical and legal research” into digital currencies but has no plans to issue one because there was no demand.

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Author: AnTy

China’s Central Bank Digital Currency is “Digital Form of the Yuan” & “Not for Speculation”

  • Mu Changchun, central bank veteran in charge of the plan for virtual yuan says it will not need the backing of a basket of currencies
  • Chinese internet users unimpressed by no speculating on the virtual currency part

China’s new sovereign digital currency would not be open to speculation like other cryptocurrencies, said a Chinese central bank official on Saturday.

Mu Changchun, head of the People’s Bank of China’s digital currency research institute said it would be a “digital form of the yuan” that wouldn’t need the backing of a basket of fiat currency.

“The currency is not for speculation. It is different to bitcoin or stable tokens, which can be used for speculation or require the support of a basket of currencies,” Mu said.

The central bank official said that the design, formulation, and functional research and testing of the Digital Currency Electronic Payment have been completed. The next step is to roll out the pilot programs before it is launched.

But Chinese internet users aren’t excited about the idea that there would be no speculating on the virtual currency.

“So there will be no fun in it,” one person commented. Another said on news portal Sina.com, “The digital currency is just another form of the yuan, but cryptocurrencies that use real blockchain technology can be treated like gold and silver.”

However, there is no time frame for introducing the central bank-backed digital currency as of yet.

Any Chinese bank or company hasn’t officially confirmed their participation in this digital currency plan either but earlier this month there have been reports that the big four state banks and three state-owned telecom companies are involved in the process.

Meanwhile, Beijing has been cracking down on trading of Bitcoin and other digital currencies and seeing Facebook’s stablecoin Libra as a potential challenge to its capital account control. As the bitcoin price climbs back above $7,600 just a few days before Christmas, it will be interesting to see what is on the 20/20 horizon for everything the crypto world has become in the last decade and will surely blossom and grow in the upcoming decade.

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Author: AnTy