Wednesday , September 28 2022

Towards a "digital yuan": China is working hard on its own crypto-wave



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China's Central Bank has accelerated the development of its own crypto-wave.

According to China's National Bank Research Director Wang Xin, who made the announcement at a seminar at the University of Beijing, the Digital Yuan Development Program has already been approved by the Chinese Council. Member State.

In its development are included commercial structures, so the new product is competitive on the market. The head of the Central Bank noted that the financial regulator is closely monitoring the development of Libra's global cryptoLive, whose creation was recently announced by Facebook.

Earlier, Chang Changchun, the Deputy Director of the Bank of China's Payments and Transfers Division, wrote in his Caixin Financial Review Section that cryptoLights, including Libra, should be regulated by central banks.

Perhaps the very possibility of a genuine international payment instrument has prompted the Chinese authorities to speed up their work in order not to miss the opportunity to participate actively in the creation of a new global financial system. ,

Digital yuan

Chinese authorities have been working for several years to develop their own crypto-wave. The Chinese bank already owns 78 patents in the area of ​​crypto-blinds and another 44 patents related to blockchain technology [blockchain],

Earlier, the vice-president of the central bank, Fang Yifei, noted that the digital yuan would ultimately have to replace the money machine M0 [l’argent liquide en circulation]The gradual abandonment of money is a bright and particularly visible global trend in China where mobile payments are already prevalent in the daily purchases of the population. It is therefore quite acceptable that the Chinese authorities want to create a complete analogue in the trust yuan.

Until now, there has been little information about the progress of the work on creating the crypto-yuan. But following the publication of the White Book on Facebook, the Chinese authorities are working hard.

How about the benefits of Libra?

The fact is that the currency announced by Facebook is very different technically and conceptually than other cryptoLooks, including Bitcoin. Libra will be controlled by a consortium of dozens of major financial and technology companies, including Visa, Mastercard, Paypal, eBay, Uber and Lift. This consortium will also be responsible for the process and issuance of the new crypt. Libra is a "stable angle" that will be provided with trusted assets: deposits and securities of several countries with reliable currencies.

In other words, Libra is considered a means of supranational payment. SDRs – Special Drawing Rights – are the closest analogue today. But, by contrast, Libra must be a fully liquid cross-border exchange facility available to most of the planet's population, which will take a few seconds.

Following the crisis in 2008, China proposed to create a new global SDR-based reserve currency to release itself from the US dollar. That's why the Libra concept attracts globally to China, explains Sputnik Liu Dongmin, director of the World Finance Center at the Institute of World Economics and Finance at the Chinese Academy of Social Sciences.

"From the point of view of maintaining the stability of the international monetary system, supranational currencies as the main means of international payments are a relatively good solution. Compared to the sovereign currency, this currency will provide better global financial stability. But such projects have not yet been implemented – adds the expert.

The hegemony of the dollar in international payments has been criticized by many countries, including China. But the attachment of the prices of different products and services to the single currency, the dollar, was practical in international trade. The concept of Libra, on the other hand, is correct, but it can also create many problems.

For example, the White Paper states that the currency of the balance can easily be converted into a fiduciary currency. But the management consortium members are private companies that can not physically provide enough cash. Only central banks have this option, so Libra needs financial regulators to function normally, says Liu Donmin.

"Central banks in different countries need to develop regulatory measures for Libra. What's more, if this crypto flag was advertised as a means of payment around the world. Because any global currency, in spite of its basic principles, will have some influence on the monetary sovereignty and financial security of some countries. For example, with regard to monetary sovereignty, global cloaking can replace the weak currencies of some countries and gradually displace them. People will try to pay for a more stable world currency, which will put even more pressure on the price of national currencies.

National cryptobultures

The sovereignty of the national currency can be much more effectively protected by creating a national digital currency that responds to current trends in financial development, the expert says. If China releases the digital yuan, it will be the first national crypto-globe in the world, guaranteed by a stable fiduciary currency.

Attempts to create national encryption have already been undertaken. For example, Venezuela has launched El Petro with oil assets. But given Venezuela's economic situation, El Petro can hardly claim a status of international means of payment.

The situation with the digital yuan is different. The Crypto-Yuan, issued by the Central Bank of China, with all the technical benefits of crypto-loop, can be trusted in world markets and significantly increase the level of internationalization of the Chinese currency. And if Libra or another supranational currency were launched, China, given its experience and capabilities, could influence the application of the rules of operation of the new international financial system.

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