If recent events are any indicator, the race for central bank digital currencies (CBDC) appears to be heating up. In August, trials of China’s digital currency electronic payment pilot were announced in 27 cities across the country. There were also reports that some of China’s major state-run commercial banks had already started conducting large-scale internal testing of digital wallets around the same time.
First Mover Advantage
Reported by Reuters on Sept. 21, the article argued that Beijing should “accelerate the pace [of development] to seize the first track” in the global race to issue fiat digital currencies. It also referred to the competition to issue and control a digital currency as a “new battlefield” between sovereign countries.
According to this commentary, it’s important for China to win this race to “internationalize the yuan and reduce its dependence on the global dollar payment system.”
The article also noted that a PBOC digital currency research unit has already filed 130 patent applications related to cryptocurrency. In addition, there have been numerous reports indicating that China’s iron ore importers are interested in abandoning the United States dollar and switching to the new, digital Chinese yuan.
The Race for CBDC
The subject of a digital dollar is receiving increased attention as China appears to be close to the finish line. In the race for CBDC supremacy, experts from Bank of America acknowledged that China was significantly ahead of the U.S. back in June.
In fact, the PBOC announced on Sept. 21 via its official news outlet that in terms of a CBDC launch “all preparations have been completed.” The same article also indicated that conditions for the deployment had been “satisfied.”
Federal Reserve Chair Jerome Powell, who, as recently as 2019, was saying that the U.S. central bank had “not identified potential material benefits,” has taken a more urgent stance. Earlier in the summer, he told Congress, “we’re working hard on it. We have a lot of projects, a lot of efforts going on on that right now.”