The Three Use-Cases of the Digital YuanAs reported by Dovey Wan (@DoveyWan), these are Xiaochuan’s three areas where the digital Yuan will be the most useful:
- The DCEP will be used for electronic payments for retail markets among everyday consumers. This will likely take up a large portion of its function: day-to-day transactions.
- International remittances will be another area where the digital Yuan will prove instrumental. It will allow for easier inter-bank settlement. Payment ramps will be introduced.
- The digital Yuan will also help to maintain national sovereignty. Being a monetary economist, Xiaochuan does believe the Yuan should have competition within China.
Additionally, Xiaochuan also cautioned that the wrong implementation of this concept could, potentially, lead to a credit crisis. So, it needs to be done slowly and with due diligence.
Justin in, finally a clear direction for Digital Yuan)— Dovey 以德服人 Wan 🪐🦖 (@DoveyWan) November 26, 2019
ZHOU, former PBOC chairman, the most influential monetary economist in 🇨🇳 said at a forum today
There’re 2 types of CBDC implementations
1. Electronic payment orients domestic retail system (cont.https://t.co/qF1p0gVPYe
The Greater VisionUltimately, China already has a modern digital payment infrastructure to support a digital Yuan concept. WeChat and Alipay are already global payment rails. So, the state can easily tap into these existing firms for infrastructural fintech support. This will also become a key area of remittances, given that these Chinese apps are commonly being used outside of China. Dovey Wan writes that around $200B a year in payment volume comes from China’s own outbound tourism alone.
With the infrastructure in place and the political will, the digital Yuan concept will likely find itself easily plugged into the existing Chinese digital ecosystem. Around the world, something of a ‘stablecoin arms race’ is emerging among particular countries. Many countries, like the European Union and Turkey, have discussed plans to digitize their fiat currencies. Soon, state-backed stablecoins will become the new normal in our economic landscape, and China is pushing the boundaries already with its digital Yuan. As Xiaochuan is well aware, the race is on for who can dominate the world of digital currencies.
Adding more data point to the “Trojan Horse” strategies of leveraging Wechat/Alipay for future Digital Yuan adoption –— Dovey 以德服人 Wan 🪐🦖 (@DoveyWan) November 26, 2019
Simply by China outbound tourism, the payment volume can be massive – already hit almost $200B a year spending in 2019 pic.twitter.com/KL6EOf1jol
Images are courtesy of Twitter, Shutterstock.
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