The global race to launch digital currencies is fiercer as central banks from more countries explore how to use the money of the future. In the competition, China has taken the lead an early start and abundant application scenarios aided by wide broadband coverage, which will help boost the internalization of the yuan against US dollar hegemony.
The US Federal Reserve Bank of Boston and MIT,
which are developing prototypes for a digital dollar platform, aim to unveil
their research as soon as July, European Central Bank President Christine
Lagarde said that the institution could launch a digital currency in four
years. The US and the EU are speeding up their digital currency programs,
China's central bank has tested its digital currency in live pilot programs in
multiple cities across China.
China's research and development of its digital
currency is self-driven and conducted in a prudent way to fend off financial
risks. This is in contrast to other major economies, most of which are driven
by the external environment, such as the coronavirus pandemic which promoted
the need for digital trade settlement, Wang Peng, assistant professor of the
Gaoli Academy of Renmin University of China, told the that some Western economies
such as the US and European countries could face hurdles in promoting their
sovereign digital currencies, as it may require substantial time and costs to
persuade their citizens and businesses to switch from credit cards to digital
payment.
With mobile network coverage and priority given
to the project, it's widely expected that China would be the first major
economy to launch a digital currency. It is noted that the digital yuan is a very important means for China to
speed up the internalization of the yuan.
As part of its moves to revive the
pandemic-plagued US economy, the US Fed has cut interest rates to zero and
implemented unlimited quantitative easing. Following the recently signed
"Relief Bill" that totaled $1.9 trillion, the US has unleashed fiscal
stimulus spending of $5.2 trillion since the coronavirus crisis began.
Excessive US money printing is weakening the US
dollar's position in the global economy. Against this backdrop, China - as a
main engine of growth in the post-virus economic recovery - could promote the
digital yuan into an international settlement system.
China could conduct trials of the digital
yuan in international trade in offshore yuan centers, such as Hong Kong.
Similar tests could also be run in the Hainan Free Trade Zone. At first, China
could conduct trials the digital yuan in foreign trade point-to-point, and when
conditions mature, the country could also facilitate a wider regional
application. China could also use the digital yuan in trade with countries and
regions along the Belt and Road Initiative, which enjoy close economic ties
with China.
However, it is noted that China's trial runs of
the digital yuan should include tests of such functions as settlements for bulk
commodity trading, deposits and withdrawals, among other functions.
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