The digital yuan is the main competitor to the global hegemony of the dollarJudy Rubio
A digital asset that finds support from the government will be a more powerful challenge for the United States than Libra or Bitcoin. Kenneth Rogoff, a former IMF chief economist, has a similar view.
Why the US is not afraid of bitcoin and Libra
According to Kenneth Rogoff, Bitcoin, Libra and similar digital assets should receive regulatory approval. (In the article "what is Libra" read more about this promising coin). As a result, economically developed countries will be able to check their compliance with the current norms and set restrictions on their application in certain areas. This allows you to control the overall liquidity of crypto assets.
Mr. Rogoff is convinced that the use of the digital yuan is different. A digital currency backed by one of the world's largest and most powerful economies could turn global. The expert noted: "Developed countries will continue to be able to regulate it, but in many areas Beijing and Washington have political differences. These are primarily States against which the United States has imposed sanctions."
Before that, an influential economist from China, Zhou Xiaochuan (formerly head of the Central Bank of China) said that the digital currency developed by the regulator aims to serve domestic retail payments.
Rogoff is convinced that after the success in the domestic market, the digital yuan will be actively used in other countries. China will challenge the US dollar in various States, the confrontation can also be observed in the underground market.
The China's Central Bank (PBOC) has denied that it will soon launch a digital yuan. China itself is convinced that the PBOC will be the first regulator in the world to achieve this goal.
The People's Bank of China did not confirm the information on the timing of the release of the digital yuan
Zhou Xiaochuan said that the PBOC will focus on the use of cryptocurrency in order to create incentives for retail trade and payments within the state. He identified 2 areas of implementation of CBDC: electronic payments for retail and transactions between financial institutions of different countries. Beijing intends to follow the former.
In a statement the People's Bank of China said: "Media reports about the release of the digital yuan at the end of 2019, which will be supported by the country's leadership, are inaccurate and speculative."
Previously, representatives of the regulator spoke about the imminent release of state digital money. For example, Mu Changchun, who holds the position of Deputy head of the payment division of the People's Bank of China, announced the readiness of the prototype of the cryptocurrency. The research team spoke about the completion of work on the blockchain architecture.
Earlier, information publications wrote that the People's Bank of China can provide a unique right to use the digital currency to 7 organizations. Among them are several banks, as well as the country's financial and technology giants Tencent and Alibaba.
Will the People's Bank of China become the first national regulator to issue a sovereign cryptocurrency?
Huang Qifan, Vice Chairman of the China center for international economic exchanges, said: "The PBOC will be the first monetary regulator to create a viable digital currency. Libra will not be able to achieve global recognition."
During his speech at the First financial summit in Shanghai, the official stressed that in the modern digital era, the ways of payments between States and companies must change. Mr Qifan said there was a strong dependence on CHIPS and SWIFT for international Renminbi liquidity. Each instrument is in the hands of the United States and is used to achieve global financial hegemony.
Qifan noted: "SWIFT is now obsolete and has ceased to be effective. In addition, as a payment system, it is very expensive. It was created more than 45 years ago, since then the technology has hardly been updated. The efficiency of SWIFT is relatively small. The term of international Bank transfer is in the range of 3 to 5 days. For large amounts, paper documents are often needed, and this is an additional problem when conducting and processing large-scale transactions."
The SWIFT monopoly allows the payment system to receive excess profits. According to the Vice-President of the analytical center, in his eyes the Libra project has small global prospects. Like bitcoin, this is nothing more than the desire of individual organizations to compete with sovereign currencies.
Mr. Qifan continued: "This decentralized currency, which is based on blockchain technology, is outside the limits of sovereign money. Therefore, there are no tools to stabilize the value, there is no guaranteed emission base, it is difficult to create wealth that will actually be valuable to society. In general, I do not believe in Libra's global success."
Qifan is confident in the great prospects of issuing cryptocurrency by Central Banks. Such a tool will make payments safe and convenient. Regulators have every opportunity to think through the rules that allow the binding of digital currencies to the national GDP, loans, precious metals and budget revenues. According to the expert, the Bank of China has been exploring the possibility of issuing digital currency for more than 5 years.
Attempts by the Central Bank of China to refute the imminent release of the digital yuan prompt to think that we will not have to wait for the first national cryptocurrency for a long time. This event can become a real breakthrough in the field of blockchain technologies and attract special attention to it. If in the future the world will see the release of digital yuan, try to buy a few coins and learn about their features. It will be a valuable experience.
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