As China launches its state digital currency, the US and UK appear to be stepping away from the idea.
Full steam ahead in China
Last week China took another big step towards the introduction of its new central bank digital currency (CBDC) with the launch of a new app for iOS (Apple) and Android phones.
The so-called ‘e-CNY’ (digital yu’an) app is available to users in 12 Chinese cities and regions, as well as the host cities for next month’s Winter Olympic Games, Beijing and Zhangjiakou.
According to Nikkei Asia, once the app is granted permission to check a phone’s location, eligible users in those places can sign up for an account and start using the app’s digital wallet.
China’s CBDC operates as a public-private partnership and users of the app will have to link one of nine partner banks with their digital wallet.
Foreign athletes and visitors during the Winter Olympics will be able to use e-CNY for payments
Wallet owners will be able to transfer money between their own bank accounts and wallets and to other e-CNY users.
The system will also accommodate offline payments, like Alipay and WeChat Pay, the dominant mobile payment systems in China.
According to Bloomberg, foreign athletes and visitors during the Winter Olympics will also be able to use e-CNY for payments.
Visitors will be able to download the app or get a card that stores the digital yuan, or convert foreign bank notes into e-CNY at self-service machines, according to the Bank of China Ltd, a state lender and official partner of the games.
Athletes and their coaches will be eligible to get wristbands that act as e-wallets and can be swiped to pay for goods or services.
According to Richard Turrin, a China expert and author of Cashless, a book on the country’s digital currency project, China is also laying the ground for the use of the e-CNY overseas by means of its ‘Belt and Road’ infrastructure initiative, with many near-neighbours to the US participants in the initiative.
China is also laying the ground for the use of the e-CNY overseas
As of December 2021, 19 out of 33 countries in Latin America and the Caribbean had signed up for the Belt and Road. In addition to Cuba, they include Jamaica and six other island states in the Caribbean; El Salvador, Costa Rica and Panama in Central America; and Venezuela, Guyana, Suriname, Ecuador, Peru, Bolivia, Chile and Uruguay in South America.
Turrin was a 2021 guest on the New Money Review podcast.
Little support for UK or US CBDC
But while China moves full steam ahead with its state digital currency project, the UK and the US show few signs of following suit.
Today the influential Economic Affairs Committee of the UK’s House of Lords has released a report in which it questions the need for a British CBDC.
“The introduction of a UK CBDC would have far-reaching consequences for households, businesses, and the monetary system for decades to come and may pose significant risks depending on how it is designed,” the report’s authors said.
a US CBDC would “put the [Federal Reserve] on an insidious path akin to China’s digital authoritarianism”
“These risks include state surveillance of people’s spending choices, financial instability as people convert bank deposits to CBDC during periods of economic stress, an increase in central bank power without sufficient scrutiny, and the creation of a centralised point of failure that would be a target for hostile nation state or criminal actors.”
In the US, a member of the House of Representatives yesterday introduced a bill aimed at preventing the country’s central bank from issuing a CBDC.
Minnesota Representative Tom Emmer said that a US CBDC would “put the [Federal Reserve] on an insidious path akin to China’s digital authoritarianism.”
Keeping money public
Earlier this week, researchers at the Basel-based Bank of International Settlements (BIS) said that a CBDC could be one of the public infrastructures necessary to prevent large tech firms from taking over money completely.
In a new working paper, economists Karen Croxson, Jon Frost, Leonardo Gambacorta and Tommaso Valletti highlighted the growing power of digital platforms like Google, Facebook (Meta), Amazon, Alibaba and Tencent.
The economists said that new public infrastructures, such as state-issued digital identity, retail fast payment systems and central bank digital currencies (CBDCs), together with competition rules and requirements for data portability, currently offer the most promising way to control tech platforms’ power.
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