Written by: Christopher Attard. Christopher's background is in journalism and finance, having studied psychology at the University of Malta. He has worked in the bitcoin and cryptocurrency space for years and provides services for SMEs in the industry. Get in touch at [email protected]
China’s announcement to locally launch its digital Yuan is set to be a major catalyst that drives legacy financial systems into the era of bitcoin and decentralised money.
Throughout 2019, the People’s Bank of China (PBOC) regularly hinted at the possibility of a digital Yuan as it ramped up its development of the digital token which would enable a two-tiered economic system, under which both the PBOC and commercial banks would function.
On the 24th of March, the PBOC had allegedly completed the development of all the basic functions for the currency and were believed to have moved on to drafting laws for its implementation. Now, China is seizing the moment to publish a trial version of a wallet application for the digital Yuan. In fact, Executive Director of M&A, Global Fiat, Ling Zhang confirmed this when she shared screenshots of the application on April 14, which were retweeted by Binance CEO, CZ.
China's CBDC (Central Bank Digital Currency) in trial already?— CZ Binance 🔶🔶🔶 (@cz_binance) April 15, 2020
Execution speed. https://t.co/0Yxysj3O40
The application is meant to be a trial version for four cities, namely Shenzhen, Chengdu, Suzhou and Xiongan. The move comes as part of a broader project for the Xiongan area which is set to have intelligent infrastructure including a 5G network, supercomputing capabilities, big data facilities and of course, digital currencies. Some major companies such as Tencent, Alibaba, JD.com and Baidu already operate in the region and this official digital Yuan test-launch speaks to the fact that plans for the digital economy are rapidly unfolding.
Interestingly enough, while public focus is fixed on this pandemic, development of the digital yuan seems to have accelerated, most likely in a bid to outpace the US, who are also making inroads into the prospect of a digital Dollar.
Just last month, the US attempted to pass a bill that would set in motion plans for a digital Dollar, confirming the trend towards digital currency adoption on a country, state and global level. While excerpts of the digital Dollar had since been taken out of a previous version of the “Automatic boost to communities act (ABC)”, they’ve now been reintroduced as the federal government just issued a proposal to provide $2,000 per month to residents until this period of uncertainty is over.
In essence, the US government is proposing to introduce a new system to support a form of universal basic income (UBI). Under the ABC Act, the Federal Reserve (FED) would effectively create “FedAccounts,” or “Digital Dollar Central Bank accounts”, which businesses and citizens would use to access the country’s financial services.
An excerpt of the bill reads:
No later than January 1, 2021, the Secretary shall offer all recipients of BOOST payments the option to receive their payments in digital dollar wallets.
Notably though, these digital Dollars are not stablecoins and do not appear to be based on any form of blockchain technology. Instead, the bill is intended to provide easier access to US government funds while also acting as a government service provider for citizens.
This would include “debit cards, online account access, automatic bill-pay, mobile banking and automatic teller machines maintained in conjunction with the United States Postal Services at its physical locations.”
Eyebrows were further raised when new developments on the shunned Facebook Libra project resurfaced last week. More specifically, the Libra Association announced significant changes in its whitepaper, where Facebook is now aiming to launch a series of fiat-pegged stablecoins instead of one multi-currency backed token.
Meanwhile, the Financial Security Bureau (FSB), which is an organisation of central banks from G20 countries has moved to propose the possibility of banning current well-known stablecoins in the crypto space.
Without delving into the entire document, the key takeaways are that the FSB delineated ten recommendations to central banks in order to regulate stablecoins, which included outright prohibition. The regulations would be implemented on stablecoin leaders such as USDT, USDC, TUSD, PAX and DAI.
The timing of all these events could not be more incredible, and set an unofficial kick-off for the race towards a new post-crisis digital economy. Of course, with the trillions upon trillions of Fiat currencies being printed, the creation of central bank accounts serve to bring the masses one step closer to bitcoin, whose monetary policy towers over every other currency currently in existence.
And with the halving coming up in less than 20 days, this sets an even better precedent for true mass adoption the likes of which we’ve never seen. The clock is ticking and the game is on.