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The "digital currency promotion war" brought about by Facebook's Libra has gradually evolved into a battle to defend the monetary sovereignty of central banks. Europe is working to create an electronic euro, and China's digital yuan is about to be launched... The era of central bank digital currencies may soon arrive. Some media reports even pointed out that the first batch of central bank digital currencies may be seen in 2020.
Things are indeed moving in this direction. Central banks and institutions around the world have begun to consider the possibility of issuing central bank digital currencies, and many countries are gearing up.
China: Strong signal launches DCEP
As early as 2014, the People's Bank of China established a special research group to issue legal digital currency to demonstrate the feasibility of the central bank issuing legal digital currency (DCEP). On March 28, 2018, the People's Bank of China held a 2018 National Currency, Gold and Silver Work Video and Telephone Conference, which pointed out that "steadily advance the research and development of central bank digital currency."
On November 28, 2019, Fan Yifei, deputy governor of the People's Bank of China, said at the Sina Golden Kylin Forum that at present, the central bank's legal digital currency DC/EP has basically completed top-level design, standard formulation, function development, joint debugging and testing, etc., under the premise of adhering to dual-tier issuance, M0 substitution, and controllable anonymity. In the next step, it will follow the principles of stability, safety, and controllability, reasonably select pilot verification areas, scenarios, and service scopes, continuously optimize and enrich DC/EP functions, and steadily promote the introduction and application of digital legal currency.
It is worth mentioning that Huang Qifan, Vice Chairman of the China Center for International Economic Exchanges, delivered a keynote speech entitled "Digitalization Reshaping the Global Financial Ecosystem" at the first Bund Financial Summit, stating that after 5 or 6 years of research, the digital currency of the People's Bank of China has matured in technology and may become the first central bank in the world to launch digital currency. The digital currency launched by the central bank is first exchanged to commercial banks or institutions, and then exchanged to the public. The significance of doing so is not the digitization of existing currencies, but the replacement of M0, which is conducive to the circulation and internationalization of the RMB and provides a strong reference for currency placement and monetary policy formulation. Huang Qifan added that he does not believe that Libra will succeed. For sovereign states, the best way to exercise the right to issue currency is for the government and the central bank to issue sovereign digital currency.
Europe: Exploring the possibility of central bank digital currency The European Central Bank has begun exploring the possibility of central bank digital currency. According to senior ECB officials, the ECB digital currency is expected to make progress in the coming months, but they believe that the project still faces many challenges, and these challenges cannot be solved in the short term, but will exist for a long time.
In an interview with The Independent, Bruno Le Maire, the French Minister of Economy and Finance, has made it clear that he will not authorize Libra in Europe, and he has discussed the creation of a "public digital currency" with Mario Draghi, the outgoing president of the European Central Bank. The European Union will definitely stick together, and Germany has already taken the lead.
At a meeting hosted by the French Prudential Supervision and Resolution Authority (ACPR), the Governor of the Bank of France, François Villeroy de Galhau, said that the central bank will soon begin testing digital currency and "will launch a call for the project before the end of the first quarter of 2020". According to Villeroy de Galhau, France is keen to participate in digital currency innovation. However, he also warned that the country needs to "carefully and methodically" try out new technologies. According to previous news, the Bank of France will reorganize the regulatory system to include digital currency in regulation.
The governor of Sweden's central bank has outlined a six-step plan on how the national bank can implement its own digital currency, which needs to be completed before the idea can be fully implemented. Sweden's digital currency must meet the following conditions: 1. It must be available 24/7 and can be used for payments anywhere, regardless of the size of the money; 2. Cross-border transactions are a must, and the Swedish digital currency must also be easily convertible into other suitable currencies; 3. Legal tender laws must be updated to include digital currencies within their jurisdiction; 4. Digital currencies will be issued directly by the banks themselves and supervised by the Swedish central bank; 5. Digital ID cards will accompany digital currencies to prevent money laundering and improper use; 6. Physical cash must still be retained as a safeguard when the digital currency system fails. The timeline for meeting all six of the above points is still under discussion, but the Swedish digital currency may not be fully mature until 2021 at the earliest.
Recently, the French central bank proposed that the eurozone should establish a blockchain-based settlement system that can transfer euros faster and at a lower cost than existing technologies. Denis Beau, the first deputy governor of the French central bank, is very supportive of distributed ledger technology (DLT). He believes that this emerging technology may solve many outstanding market problems. According to Denis Beau, the French central bank is considering a solution, namely: central bank digital currency (CBDC). He even said that the eurozone "has a responsibility" to at least consider establishing a central bank digital currency. If the eurozone does not have it, other "disorderly practices and other adaptability issues" may arise.
In addition, the Italian central bank also pointed out that the national digital currency could save the European Union 76 billion euros each year, and the Turkish president also pointed out that the testing of its central bank digital currency "Digital Lira" will be completed in 2020.
The United States, Japan, and South Korea: Researching but may not launch in the short term. Although China and the European Union are actively researching central bank digital currencies, the United States, Japan, and South Korea do not seem to be in a hurry.
During a Dec. 5 hearing of the House Financial Services Committee, U.S. Treasury Secretary Steven Mnuchin said that he and Federal Reserve Chairman Jerome Powell both believe that a central bank digital currency is not needed until at least 2025.
Steven Mnuchin pointed out: "The reason is simple. The United States has a very complex system. What it really needs is a real-time electronic payment system. The Federal Reserve is studying this."
In addition, in October this year, according to Reuters, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, said that given that the US dollar has become the world's reserve currency and that new technologies need to be tested, it is "inevitable" for central banks, including the Federal Reserve, to issue digital currencies. However, Harker also pointed out that the United States should not be the first country to issue digital currencies. Harker also admitted that his views are currently in the "minority" in the Federal Reserve.
Hong Kyung-sik, head of the Bank of Korea's financial settlement department, said at a payment-related conference in Seoul that South Korea's payment and settlement infrastructure is very advanced, with a high degree of openness and a variety of developed payment methods, so there is almost no need to issue a central bank digital currency (CBDC). He also said that "developing countries with poor financial infrastructure" may find that CBDC helps improve inclusion and reduce costs associated with cash handling. For China, he believes that central bank digital currency can support monetary policy and help promote the internationalization of the renminbi.
Haruhiko Kuroda, governor of the Bank of Japan, also said that Japan does not need the central bank to issue digital currency now, and the Bank of Japan will continue to study digital currency. He also said that if stablecoins supported by large platform companies are issued globally, it may have an impact on monetary policy and the stability of the financial system. Stablecoins should not be issued without adequate regulations and risk management systems. Masayoshi Miyai, deputy governor of the Bank of Japan, believes that central bank digital currency (CBDC) will not be widely supported, and the abolition of cash will make it inconvenient to place public infrastructure, so no central bank will do so. He also added that if digital currency still has negative interest rates, people will still choose cash to reduce spending, thereby limiting the adoption rate of central bank digital currency.
Conclusion: At present, countries are still cautious about the launch of central bank digital currencies, but looking at the future digital battlefield, no country will give up the research and exploration of central bank digital currencies. In the future, competition between countries will be reflected in the financial field, especially in the field of financial technology. From this perspective, the research and promotion of central bank digital Huobi is imperative and will have far-reaching impacts. (Golden Finance) |
