"The view I'm coming to about central bank digital currencies is, unless they are really, really tightly integrated and interoperable with the cryptocurrency ecosystem, then they're a bit of a dead end." Loading.Ethan Isaac Segal, Coins, Trade, and the State: Economic Growth in Early Medieval Japan ( Cambridge : Harvard University Asia Center, 2011 ) Richard von Glahn, “The Ningbo-Hakata Merchant Network and the Reorientation of East Asian Maritime Trade, 1150-1300.” Harvard Journal of Asiatic Studies 74/2 (2014): 251-281. "It's because they think that this gives them more control over retail payments, retail participation, and in finance."īut Dr Berg thinks in the end, CBDCs may never be able to compete with mainstream cryptocurrencies that, by their very nature, are untethered from traditional financial institutions. "There are a number of proof of concepts around the world … but China is the only one that's been live since mid last year," Dr Berg said. The US Federal Reserve has a joint project with the Massachusetts Institute of Technology to explore the issue - but for now China still leads the way. Many central banks, including the Reserve Bank of Australia, are mulling their own digital currencies to be issued alongside regular money. "It's rubbish … if China really wanted the to be the international reserve currency, they have to open it up, they'd have to abolish capital controls, they have to make it flow around the world freely," Mr Gerard said.ĭubbed the 'Britcoin' by Mr Sunak on Twitter, the move has been designed to protect the pound against cryptocurrencies and advance the UK's payment systems. The DC/EP could help unshackle China from the American-led global financial order if it manages to become a large-scale trade currency - and it could be propelled through China's Belt and Road Initiative, according to China's National Institution for Finance and Development.īut some point out any Chinese ambition to upend the global financial order with a highly regulated and monitored digital currency is at best unrealistic, and at worst a fantasy. Hong Kong's Chief Executive Carrie Lam admitted she now has "piles of cash" after banks refused to take her money in the wake of US sanctions against her. That makes America's ability to implement sanctions on Chinese individuals and Chinese businesses much easier. Up to 75 per cent of China's foreign reserves are believed to be held in US dollar denominated assets.Īnd according to a report from the US Congressional Research Service last year, US dollars make up 90 per cent of all transactions in foreign exchange. CCP pumps millions of yuan into trials, offers incentivesĬhina's digital payment systems are considered one of the most advanced on the planet, and WeChat and Alipay dominate the mobile payment market.īoth systems allow users to pay for goods and services via a smartphone app, and the DC/EP works in a very similar way but with central bank-backed digital currency. There have also been some suggestions the nascent project could also be used, as Mr Zuckerburg predicted, to try to loosen America's grip on the global financial order. In fact, experts say it's the antithesis of the world's largest digital currency Bitcoin, because it is about increased control and regulation rather than the opposite.Īnd the DC/EP could become a new tool for the Chinese Communist Party (CCP) to monitor and control its people, and its already heavily regulated financial systems, even more. The digital yuan is not like other cryptocurrencies. Trials have been running since last year in cities across China for the new "Digital Currency Electronic Payment" (DC/EP) system – a digital yuan controlled by the central bank. Now, 18 months down the track, Facebook's plans are stalled and China has the most robust central bank digital currency (CBDC) in the world. He was giving US regulators a choice – the Facebook way or the China way.
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