Spain's "El Mundo": Central bank digital currencies will shake the dominance of the US dollar in the international settlement system
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Spain's "El Mundo": Central bank digital currencies will shake the dominance of the US dollar in the international settlement system
Issuing a legal digital currency in China demonstrates a proactive and innovative spirit.
Navigating Web3 tides with focused insightsRecently, Spain's El País reported in an article titled "China Accelerates Promotion of Digital Currency" that at the end of April this year, the People's Bank of China (PBOC) announced pilot testing of its digital currency in closed internal trials in Shenzhen, Suzhou, Xiong'an, Chengdu, and future Winter Olympics scenarios. Leading the world in promoting digital currency, China has made significant technological advances in this area.
Peru's Siglo 21 reported that the digital currency issued by the PBOC is traceable and can effectively combat illegal criminal activities such as money laundering. The widespread adoption of digital currency will facilitate everyday financial transactions, allowing people to complete transactions without queuing in banks.
Spain’s Público pointed out that China has paved the way for national legal tender digital currencies. The PBOC’s digital currency could shake the dominance of the U.S. dollar in the international settlement system. China's issuance of a central bank digital currency reflects ambition and innovation.
In late April, a senior official from the PBOC Digital Currency Research Institute stated that the development of digital RMB is steadily progressing, with initial closed internal pilot tests being conducted in Shenzhen, Suzhou, Xiong'an New Area, Chengdu, and future Winter Olympics scenarios to continuously optimize and improve functionality. At the 2020 national video conference on monetary gold and silver and security work, the PBOC indicated it would further “prioritize” digital RMB.
It is understood that under the principles of two-tier operation, substitution for cash in circulation, and controllable anonymity, the digital RMB system has largely completed top-level design, standard setting, functional development, and joint debugging tests, following the principles of stability, security, controllability, innovation, and practicality.
From 2014 to now, the PBOC has spent six years researching and developing a digital currency. The digital currency launched by the PBOC is a new encrypted electronic money system based on blockchain technology, which benefits the circulation and internationalization of the RMB. The development of China's internet technology, especially blockchain technology, provides strong support. In 2016, the State Council included blockchain in the "13th Five-Year Plan" for national informatization, designating it as a strategic frontier technology. In recent years,乱象 in the blockchain industry have been effectively regulated, and the technology has matured, creating favorable conditions for digital currency development. Digital currency has become an important application scenario for blockchain.
Central bank digital currency has advantages such as being difficult to counterfeit, low issuance cost, and convenient transactions, forming a complementary relationship with sovereign currency.
Counterfeit banknotes exist among currently circulating cash. Governments have cracked down on this in recent years. Meanwhile, electronic payment tools like bank cards and internet payments cannot fully meet the public’s demand for anonymous payments. The design of central bank digital currency primarily targets replacing cash in circulation—retaining the attributes and main features of physical cash while also meeting demands for portability and anonymity, and striking a balance between privacy protection and combating illegal activities. As Wang Xin, director of the PBOC Research Bureau and Monetary Gold Bureau, stated, central bank digital currency in China mainly serves as a partial substitute for cash, helping optimize the central bank’s payment functions and enhancing the status of central bank money and effectiveness of monetary policy.
While improving monitoring efficiency of currency circulation and enriching monetary policy tools, central bank digital currency also offers new directions for the evolution of the international monetary system. Currently centered on the U.S. dollar standard, many countries use the dollar as a transaction and reserve currency. When the U.S. economy encounters problems, adjustments in Federal Reserve monetary policy often trigger ripple effects globally. In the future, digital currencies could serve as a supplement, constraining excessive volatility of the dollar and reducing the risk of dollar crises triggering global disasters.
Currently, China is accelerating the research and development of digital currency, but still faces a series of technical challenges. Looking ahead, as acceptance and credibility of central bank digital currency grow, it should establish an appropriate proportional relationship with sovereign currency and gold reserves.
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