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China’s Digital Yuan Ranks Third in World; Second In Asia In CBDC Race: Report

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China has made significant progress in the development of central bank digital currency [CBDC], becoming the world’s first major economy to pilot a digital currency. Even so, as per a new report, the digital yuan is not the topmost CBDC in the world or in Asia.

According to the latest report by PricewaterhouseCoopers [PwC], China is third when it comes to project maturity, behind the Bahamas with the Sand Dollar and Cambodia, with project Bakong.

The report also mentioned that the digital version of the Bahamian Dollar as well as Cambodia’s DLT-based interbank payment system is either accessible to all the residents via the mobile application, physical payment card, or already is tied up with domestic commercial banks and payment processors. But China is still at the advanced level of trial.

China’s Digital Yuan Might Not Be Able to Tip Dollar’s Supremacy Just Yet

Despite popular notions about Digital Yuan, there are other CBDCs at the global level that require attention. Many market commentators have previously speculated China’s digital yuan to be a huge threat to the dollar. The digitization of China’s yuan has been a thing of global fascination especially in the backdrop of a flourishing cryptocurrency market. With regards to political implications and as well as the new economic levers that digital yuan might generate for the government domestically as well internationally, were also given adequate food for thought.

However, a senior Bank of Japan official recently downplayed the potential for China’s digital yuan to threaten the dollar’s position as the world’s main reserve currency. Kazushige Kamiyama, who happens to be head of the BOJ’s payment systems department and the individual who is tasked with looking into a virtual Japanese currency stated,

“The dollar’s status as the key global currency won’t change so easily. In fact, the dollar’s advantage may strengthen further if the U.S. goes with digitalization.”

Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, also noted that despite China’s massively-hyped digital currency advances, the digitized yuan is yet to prove to be cheaper, more efficient, more private, or more convenient than the existing domestic and international payment systems. While addressing the “threat” to the USD, Chorzempa added,

“[It is] unlikely to represent any more a threat to the dollar’s international dominance than the current forms of RMB, at least over the short and medium-term”

ECB Garners Over 8,000 Responses To Its Public Digital Euro Consultation

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The central bank digital currency [CBDC] wave seems not to spare anyone. A few months ago, the European Central Bank aka ECB, taken an interest in CBDCs and decided to move forward with its research.The bank, however, chose to involve the public as it intended to garner the public’s expectation on the development of the digital euro.

Just as China and Japan have been announcing the swift development of their CBDC, Europe seemed to be taking it slow. Christine Lagarde, President of the ECB, even revealed that developing the digital euro could take up to four years. Even so, the bank’s latest announcement seemed to be promising.

ECB’s Digital Euro Must Entail Privacy

The central bank had allowed the public to list out their priorities and expectations with the digital euro, under the public digital euro consultation initiative. The bank managed to amass over 8,200 responses out of which 47% of the responses were from Germany. Italy and France recorded a total of 15% and 11% respectively. This consultation was rolled out back in October 2020 and went on till 12 January 2021.

Furthermore, with 94% of these respondents being private citizens, over 43% sought privacy from the digital euro. About 18% of them expected security from the CBDC. The ECB further wrote,

“Privacy is the most important feature of a digital euro for both the public and professionals, especially merchants and other companies. Both groups support requirements to avoid illicit activities, with fewer than one in ten responses from members of the public showing support for full anonymity.”

Interoperability is a must now. The ability to pay across different areas of Europe was demanded by 11% of the participants. While 9% did not want additional costs the remaining 8% asked for offline usability.

The ECB further reported that the aforementioned numbers were a record for the bank with regard to the participation of the public. Hearing out the needs of the public, the Executive Board member of the bank, Fabio Panetta suggested that the digital euro would be successful only if it complied with the demands of the public. Panetta added,

“We will do our best to ensure that a digital euro meets the expectations of citizens highlighted in the public consultation.”

Sweden Fastens Its Pace In The Development Of CBDC As China Moves Ahead

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Central bank digital currencies [CBDC] have started to take the world by storm. Sweden was seen trying to catch up to China in the development of the CBDC with its latest announcement.

As countries across the globe have just started to explore the prospects of launching a CBDC, China is already at the testing phase of the digital yuan. While Japan is working on Phase 1 of its CBDC pilot, Sweden announced that it had concluded the first phase of its CBDC pilot program. However, this pilot reportedly gave rise to a number of issues that had to be addressed by the country’s central bank.

Sweden Completes Phase One Of CBDC Development

The central bank of Sweden, Sveriges Riksbank released a recent report revealing the results of Phase one of the CBDC pilot conducted by the bank. While the e-krona proved to be competent in various aspects, certain things like the purchase of coffee by Stockholmers with the e-Korna had to be looked into by the bank.

The report further read,

“The solution tested in phase one of the e-krona pilot has met the performance requirements made in the public procurement. But this has taken place in a limited test environment and the new technology’s capacity to manage retail payments on a large scale needs to be investigated and tested further.”

With scalability as a major issue, the e-krona still needed some work. Additionally, issues pertaining to privacy were also noted in the e-krona. While the second phase of the Sweden digital currency is said to address all these issues, it would also focus on aspects such as retail payments and storage systems.

Addressing the privacy feature, the bank stated,

“The Riksbank is currently analyzing to what extent the information stored in the transaction history can be regarded as information covered by banking secrecy and whether it comprises personal data.”

Japan’s Central Bank Rolls Out Phase 1 Of CBDC Pilot As Scheduled

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Japan spruced up its central bank digital currency [CBDC] plans after China decided to reveal its progress in the same. Several countries across the globe seem to have been alarmed by China’s plunge into financial digitalization.

While Japan has been working towards the pilot of their native CBDC since October 2020, the country’s central bank, Bank of Japan announced that Phase 1 of the digital yen would be launched in April. The bank seemed to be on its toes as it revealed that this pilot was rolled out as scheduled.

Japan’s Timely Developments

Central bank-issued digital currencies created an uproar among countries across the globe and Japan stated that it would get on this bandwagon. In a recent announcement titled, ” Commencement of Central Bank Digital Currency Experiments” the country’s central bank affirmed that it would soon begin “experiments” with regard to its CBDC.

The announcemnet further read,

“The Bank of Japan has been undertaking preparations to begin experiments on Central Bank Digital Currency (CBDC) in early fiscal year 2021, to test the technical feasibility of the core functions and features required for CBDC. As necessary preparations are now complete, Proof of Concept (PoC) Phase 1 begins today.”

Furthermore, the bank pointed out that a test environment would soon be formulated as part of Phase 1 in order to facilitate experiments pertaining to CBDC as a medium of payment, including “issuance, distribution, and redemption.” This will reportedly be done throughout March 2022 for about a year.

The Asian country seemed to be adamant about the launch of a CBDC as it even set up a Liaison and Coordination Committee on Central Bank Digital Currency. This committee recently had its first meeting where the Executive Director of the Bank of Japan, UCHIDA Shinichi suggested that “if the Bank judges it necessary to go a step further, it will also consider a pilot program that involves payment service providers (PSPs; e.g., banks and non-bank PSPs) and end users.”

China Takes Digital Yuan To Hong Kong For A Cross-Border Pilot

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China has been spearheading the entire central bank digital currency [CBDC] game. The Covid-19 pandemic enhanced the importance of digitalization as a mere human touch had the ability to cause death. While several countries despise cryptocurrencies they still decided to go ahead with a central bank digital currency.

While the world fears that China could garner financial and technological dominance over the globe, several countries have been forced to fasten the pace in the development of their respective CBDC. Japan recently revealed that it would soon roll out Phase 1 of its CBDC pilot. Just when all the regions are prepping for the launch of this digital asset, China revealed that it had conducted its first cross-border pilot of its CBDC.

China’s Digital Yuan Moves Ahead With Full Force

As per a recent report from a local news platform, Sina Finance China has taken the digital yuan to Hong Kong to explore the cross-border aspect. The Chinese central bank, People’s Bank of China’s [PBoC] digital currency research bureau’s director, Wang Xin revealed that a couple of technical tests were done to review the cross-border phase of the Chinese digital currency.

Wang Xin reportedly made this announcement at the State Council Information Office of China hosted a press conference earlier this week. During this event, the official pointed out that the PBoC had joined hands with the Hong Kong Monetary Authority for this pilot.

Additionally, several platforms across the country have been testing the digital yuan. Recently, the country had given the public a chance to test the digital yuan. Several shoppers reportedly carried out over a thousand transactions during the Women’s day weekend.

Speaking about the emergence of CBDCs, Wang Xin told CNBC,

“On one hand, this is related to more and more central banks in the world participating in the development of domestic digital currencies. On the other hand, this (interest) may also be related to the large increase in the price of bitcoin.”

Here’s What MasterCard CEO Thinks Of Bitcoin, CBDC, and Stablecoins

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MasterCard CEO is all in for CBDC and stablecoins, but Bitcoin is still not in his good books.

It has been quite a ride for Bitcoin. From gaining notoriety for being the most volatile asset of recent times to the mainstream embrace, the world’s largest cryptocurrency has seen it all. Trading a little over a decade, Bitcoin has not only gained a massive fanbase but has also managed to flipped previous critics into its staunch supporters.

But this executive of a payment giant does not feel the same. In a recent interview with Fortune, MasterCard CEO Ajay Banga expressed his views on CBDCs, stablecoin as well as Bitcoin. His exact words were:

“Central bank digital currencies are really interesting. Stablecoins a little less so. Bitcoin, not really.”

Seems like not much has changed in the last couple of years. Banga has never been a fan of Bitcoin, the MasterCard exec has previously questioned its volatility. Despite his efforts to connect 1 billion people worldwide to the banking system, he had previously revealed that he does not see much usecase for cryptocurrencies such as Bitcoin in that push for greater financial inclusion.

MasterCard CEO Bullish On CBDC But Not Bitcoin

Citing Bitcoin’s volatility as the reason, MasterCard’s Banga had earlier questioned Bitcoin’s role in the world. While he is may not be a big fan of cryptocurrencies, the exec is, however, bullish on the growth of more stable cryptocurrencies especially by central banks which he believes could be an important milestone since it would be backed by each country’s existing currencies.

MasterCard CEO had opined,

“Fiat currencies, if they were to go digital, would they be helpful in cross-border trade flows and improving the efficiency of those – yes for sure.”

Back in 2018, the exec had termed cryptocurrencies as “junk”. But as Bitcoin and by extension the cryptocurrency slowly started becoming an important part of the payments world, MasterCard announced the supporting selected cryptocurrencies directly on its network.

Japan’s Central Bank Takes A Plunge Into The CBDC Game

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After China, Japan seems to be moving in full force. The central bank digital currency market has been firing up as digitalization has been gaining momentum. While several countries have just started out exploring the prospects of the CBDC, a few others like China have already begun testing the digital yuan.

Now, Japan seems to be catching on to the CBDC train. In a recent announcement, the country’s central bank, Bank of Japan revealed that it was moving ahead with respect to the pilot of its CBDC.

Japan Steers Towards The Development Of CBDC

The Bank of Japan had reportedly rolled out the Liaison and Coordination Committee to spearhead the development of the CBDC. While the first meeting of the Liaison and Coordination Committee on Central Bank Digital Currency was recently concluded, the Executive Director of the Bank of Japan, UCHIDA Shinichi addressed the same. The speech read,

“We will begin to test the technical feasibility of the core functions and features required for CBDC through a Proof of Concept (PoC) from April 2021. If the Bank judges it necessary to go a step further, it will also consider a pilot program that involves payment service providers (PSPs; e.g., banks and non-bank PSPs) and end users.”

Additionally, the Japanese central bank revealed that Phase 1 of the CBDC pilot would make a debut by next month. The bank has reportedly been working on the pilot since October, last year.

Furthermore, speaking about the repercussions of launching a CBDC, the Exec suggested that the Japanese central bank would roll out one keeping in mind its compatibility with the future payment and settlement systems. Its coexistence with cash was also mentioned in the speech. The speech further read,

“These role-sharing arrangements will still be necessary even in a world with CBDC. I believe that it is the private sector, such as yourselves, that should be the chefs who serve up the dishes, or convenient payment services, by using CBDC — provided as a public good — as an ingredient.”

German Central Bank Steers Clear Of A CBDC; Blockchain-Based System Underway

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Deutsche Bundesbank, the German central bank seems to be clear on its stance regarding the development of a CBDC. In its latest announcement, the bank revealed that it was instead focusing on the incorporation of blockchain technology.

China’s plunge into the development of central bank digital currencies (CBDC) has inspired several countries to get into this race. While an array of governments have been fearing china’s dominance over the financial sphere with it’s CBDC launch, Germany seems to be untethered. The country has time and again revealed that it doesn’t intend on rolling out a CBDC. Its latest move further reveals that the country aspires to function without a CBDC.

German Bank To Lay Its Focus On The Development Of Blockchain Tech

The German central bank seemed to be relaxing while all the governments are trying get ahead in the CBDC game. In a recent post, the bank pointed out that it was successful in testing a settlement interface for securities. However, this is via the distributed ledger technology [DLT]. With this, the country intends to bring blockchain tech into the conventional payment systems.

The Executive Board member of Deutsche Börse, Stephan Leithner, spoke about this innovation and said,

“New technologies are a key component in creating infrastructures of tomorrow that meet the markets’ needs. This project marks a major step towards more efficient securities settlement and securities digitalisation by combining new technologies with existing infrastructures in a smart way.”

While this would facilitate payments through blockchain tech, the post eliminated the need for the creation and development of a CBDC. This statement was a clear indication that the German bank wanted to go about without a central bank issued currency.

The post further elaborated on the project as it read,

“This test sees Bundesbank and Deutsche Börse now joining forces with the Finance Agency to continue the work they started on the Blockbaster (blockchain-based settlement technology research) project back in 2016. The functionality of blockchain technology in securities settlement and the cash leg settlement of transactions was successfully demonstrated in previous project phases.”

Digital Yuan To Uphold Privacy By Supporting Anonymous Transactions

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China’s central bank digital currency [CBDC], the digital yuan has been making headlines for quite a while now. The country’s plunge towards digitalization inspired an array of other countries to start developing their own digital asset. While China is well ahead in the game, all the other countries were trying to catch up.

Despite, the emergence of the digital yuan, rumors pertaining to the Chinese government controlling their citizens finances began surfacing. While privacy was a great concern of many citizens, with regard to the digital yuan, an official of the Chinese central bank affirmed that a certain magnitude of privacy would be given to those using the country’s CBDC.

Digital Yuan To Entail “Controllable Anonymity”

In a recent report by a local Chinese news portal, it was revealed that the People’s Bank of China [PBoC] intended to uphold privacy with the launch of the digital yuan. Speaking about the same at the 2021 China Development Forum, the head of the digital currency research institute of the People’s Bank of China, Mu Changchun, addressed the potentials of the country’s CBDC.

While suggesting that a entirely anonymous CBDC was out of the picture, Mu pointed out that it wouldn’t be very feasible. Since the Chinese currency would soon be used throughout the country as a national currency,it needs to come under certain anti-money laundering, anti-tax evasion as well as counter-terrorist financing procedures. However, privacy would still find its place, Mu announced.

Limited anonymity would be available, revealed the official. The PBoC will reportedly permit anonymous digital yuan transactions, however, in dainty amounts. He added,

“The digital renminbi adopts a design of small amounts anonymous, keeping large amounts traceable. In short, the protection of user privacy by digital renminbi is the highest among the current payment tools.”

Additionally, the digital yuan is already out and about for testing. The PBoC has been testing the Chinese CBDC on various platforms across the globe.

Bank Of Thailand Publishes Guidelines On CBDC Shortly After Warning Its Citizens

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Central Bank Digital Currencies, or as popularly known as CBDC, is the talk among central banks across the world. Riding the wave of a massive digital revolution, CBDCs offer risk-free, that is backed by the country’s central bank money denominated in cash. The latest country to jump the bandwagon is Thailand.

The Southeast Asian country published guidance outlining its views on central bank digital currencies [CBDC]. The Bank of Thailand [BOT] categorized stablecoins into two groups – one that is backed by the country’s currency, the baht, and other forms of stablecoins.

Thailand’s CBDC:

The guidance revealed that BOT is currently in the process of developing a retail central bank digital currency [CBDC] to accommodate the demands of the general public, enhance service efficiency in the business sector, as well as increase access to financial services. It further stated,

“The BOT will continue to closely monitor the developments of new technologies, taking into account the benefits and related risks in the effort to adopt policies supportive of promoting ongoing economic development while maintaining financial system stability.”

According to BOT, Baht-backed stablecoins are cryptocurrencies that are essentially designed to reduce volatility by pegging its value to the Baht. These are used as a means of payment. The guidelines mentioned that such stablecoins may be designated as electronic money [e-Money] under Thailand’s Payment Systems Act 2017.

While acknowledging that the bank oversees risks associated with e-Money, like in cases of settlement, money laundering cybersecurity, and consumer protection risks, BOT stated that the service providers of Baht-backed stablecoins are required to consult with it for consideration before starting any operations.

The Other Kind:

With regards to the ‘other forms of stablecoins” that include foreign currency-backed, asset-backed, and algorithmic stablecoins., BOT maintained that they are not illegal. The bank also welcomed dialogues and said that it is “open to receive comments and feedback before considering regulatory guidelines as appropriate”.

The latest development comes shortly after Thailand reportedly alerted its citizens against privately-issued stablecoin.

Previously in June 2020, Bank of Thailand had announced a partnership with The Hong Kong Monetary Authority, for the development of a prototype for a cross-border blockchain payment system known as “Project Inthanon-LionRock“.