In the long term, the absence of US leadership and standards setting can have geopolitical consequences, especially if China and other countries maintain their first-mover advantage in the development of CBDCs. Our work on digital currencies at the GeoEconomics Center is at this nexus of the future of money and national security. There are already thousands of digital currencies, commonly called cryptocurrencies. Another type of cryptocurrency are stablecoins, whose value is pegged to an asset or a fiat currency like the dollar. Cryptocurrencies run on distributed-ledger technology, meaning that multiple devices all over the world, not one central hub, are constantly verifying the accuracy of the transaction.
Alipay, part of Ant Group, extended its services internationally by initially targeting Chinese tourists and expatriates, allowing them to make payments abroad as easily as at home. Alipay’s strategy focused on online payment gateways and later expanded to in-store payments abroad. They formed strategic partnerships with international merchants and adapted their services to local consumer behaviors and regulations. This approach not only simplified transactions for users but also increased Alipay’s acceptance and usage outside China. There are several challenges, and each one needs careful consideration before a country launches a CBDC. Citizens could pull too much money out of banks at once by purchasing CBDCs, triggering a run on banks—affecting their ability to lend and sending a shock to interest rates.
Government employees as well as staff at state-owned companies and public institutions such as schools, hospitals, libraries, research institutes and media organizations in the city will be affected. “The propensity for profit-taking after a surprisingly strong rise in 2023 alternated with FOMO fear of missing out momentum. These factors are arguably the only market drivers right now without significant economic and market news.” Web3, an idea that rose to prominence last year, describes a blockchain-based, decentralized internet that could replace the Silicon Valley-centric web 2.0 that’s dominated by the likes of Google GOOG and Facebook’s Meta.
China’s Digital Yuan, or e-CNY, represents a significant advancement in central bank digital currencies (CBDCs) introduced by the People’s Bank of China (PBOC). By early 2022, over 261 million digital yuan wallets had been established, highlighting substantial adoption. Unlike decentralized cryptocurrencies such as Bitcoin, the digital yuan is centrally controlled, offering stability and enhancing transaction efficiency. This Chinese cryptocurrency is designed to improve financial inclusion, streamline payments, and strengthen anti-money laundering measures. Australia and the United Kingdom are exploring the use of digital dollars and pounds.
Most people in China don’t use cash or credit cards but rely on their phones to buy things, so these commercial platforms have become “significantly important financial infrastructure,” Mu said. If something ever goes wrong with them, “that will bring a very significant negative impact to the financial stability of China,” he said. However, deeper problems in the global digital currency market stalled their adoption of the digital yuan. A report revealed that China is among the nations that participate the most in cryptocurrency scams and have lousy jobs. This development may erode citizens’ trust in cost-backed financial innovations, including the digital yuan.
Accusations of graft against former PBOC official Yao Qian are sure to come with the launch of the digital yuan, which is at the heart of China’s financial innovation program. Users will be reluctant to use the currency due to privacy and usability concerns. Two days before the launch, the South China Morning Post reported that Charles Chang, director of the Fintech Research Centre at Fudan University, showcased the bottlenecks in adopting digital yuan. It’s not easy to convert what other consumers are paying for and transacting with to state currency, Chang said, adding that platforms such as Alipay and WeChat Pay have a near monopoly. Both platforms have a huge user base, so it is hard for the digital yuan platform to match up.
At the 2008 Olympics in Beijing, for instance, the city generated roughly $264 million per day. Today, banks typically execute such transactions using what’s called the correspondent banking system. A correspondent bank is a third party that serves as an intermediary between domestic banks in different countries. What’s been especially difficult, he says, has been signing up enough merchants and creating a rich enough “ecosystem” to make the e-CNY as useful as established payment methods.
European countries—both in the euro area and beyond—are increasingly testing wholesale CBDCs, both domestically and across borders. The Digital Yuan was rolled out to prevent monetary substitution from Libra and cryptocurrencies like Bitcoin, which was one of the original reasons. In a progress paper from the People’s Bank of China, cryptocurrencies are specifically cited as tools that “pose potential risks to financial security and social stability.” Canalys, part of Informa TechTarget, is a leading global technology market analyst firm with a distinct channel focus. We strive to guide clients on the future of the technology industry and to think beyond the business models of the past.
4- Bitcoin’s price is determined by market determinations, while the Yuan is semi-pegged in a trading range with the US dollar. Some will find the latter more beneficial as they look to avoid volatility, but this may mean losing out on long-term return that exceeds the risk. 1- Even though there are “privacy” tiers, the Central Bank requires personal identifiers to operate with the system. Even at the lowest tier, you’re required to provide a phone number, which, in China, is likely to tie your real ID if you bought the SIM in China. The lucky draw took place a day after the second-largest economy in the world announced its plan to build Shenzhen, dubbed China’s Silicon Valley, into a pilot demonstration zone for socialism with Chinese characteristics.
