Thoughts on China’s forthcoming Digital Yuan
Thoughts on China’s forthcoming Digital Yuan
Greetings #newsteem! It’s already been quite a while since I published my thoughts about the potential effects Facebook’s Libra Project could have, rights after Libra’s open source code was released and its project was formally announced after following a series of rumours that became more and more “real” over time.
Interestingly, and as expected as well perhaps, Libra caused quite some noise, both within and outside of the current crypto scene. Multiple and (inter)national governmental bodies have expressed their concerns about a plethora of things that might happen when Libra is indeed used at a large scale, causing a series of “hearings”. Most of those concerns boil down to -1- Facebook’s reputation regarding privacy related issues, -2- if such monetary power should be allowed in the hands of a corporation instead of a government, and -3- whether or not Libra, regarding the way its infra will (initially) be backed only by a relatively small set of project partners - thus labeled as being “centralised”, may be called a “cryptocurrency” in the classic sense of the word.
All this commotion might cause the Libra project’s release to be delayed, but it has also sparked - at least it looks like it has - an increased development speed on similar blockchain-based projects, that have the potential to form the initiation of everyday-life crypto-based digital payments. One such project appears to be the forthcoming PBoC’s (People's Bank of China) Digital Yuan, which is now rumoured to being developed for years already.
Potential effects caused by PBoC’s Digital Yuan
A multitude of online news sources have recently reported about PBoC’s Digital Yuan; you can read some articles on this topic here: 1, 2, 3, 4, and 5
In my Libra Post I’ve already argued why I think a project like Libra could lead the way for crypto mass adoption, but I think the effects on that caused by PBoC’s Digital Yuan would be truly massive.
Thus far, if I may say so, the global impact of crypto has mostly been just a promise of potential. Sure, there are working crypto payment systems, that mostly cater to the concept (which I fully support!) of “be your own bank” using crypto. But global mass crypto adoption, where crypto is used as the de facto preferred choice for payment transactions, is lagging behind undeniably. Libra could change that, but a Chinese state backed Digital Yuan may achieve that - and I mean this globally - even more…
And here’s why:
currently, in the western world of “1st order” developed countries, the “regular” payment infrastructure works fine as it is. Sure, lots can be said about “banksters” being in control of the financial world together with central governmental organisations, or that fiat currencies are being printed from thin air not really being backed by anything other than the promise of being of stable value, but for both every day retailers and consumers in the western world there currently isn’t a “real need” to switch to crypto. If you put yourself in the shoes of - say - a local electronics store retailer, then why would you accept crypto payments right now? Doing so might bring in additional revenue streams, coming from early adopter consumers looking for ways to spend their crypto holdings, but arguably such additional revenue caused by crypto payments might be marginal; as of today that is. Those locally and regionally operating small companies that in fact already do accept crypto payments, arguably mostly do so because they’re supportive of crypto as a whole succeeding at large. Currently they don’t “need to”, they just “want to” out of ideology perhaps. But because China is such a large international exporter of consumer goods, the international importers of those goods paying for those goods using the Digital Yuan - which paired with blockchain-based Smart Contracts can have a real use case for both the Chinese exporting companies as for the international / western product importing companies - first need to acquire the Digital Yuan prior to paying for those goods. And because there exist conversion / transaction costs to acquire Digital Yuan, it will THEN become cheaper / more profitable for the international importing retailers, operating outside of China with local western consumers who are not at all dealing directly with Chinese consumers nor businesses, to accept crypto as the preferred payment method even! Because if such retailers accept crypto, they can use the same crypto to pay for the next batch of Chinese produced imported goods, thus removing the costly fiat-to-crypto and crypto-to-fiat transaction costs.
In one sentence: a China-issued Digital Yuan will not only increase national (China-based) crypto adoption, but stimulate INTERNATIONAL cryptocurrency payment adoption among retailers.America’s “trade war” tensions with China might have initiated, at least pushed, Digital Yuan project developments. From China’s perspective it makes perfect sense to initiate a new, self-controlled, payment mechanism and asset class, thus reducing their need to retain US Dollar reserves and comply with US initiated international sanctions. A Digital Yuan puts China in a position to stimulate every day crypto usage, internationally. Being an autonomous global force, instead of Facebook’s Libra, a Digital Yuan does not have to deal with complying with all international governmental organisations that now seem to hinder Libra’s roll-out. Instead, the mere presence of the Digital Yuan - which developments are rumoured to be intensified due to the Libra announcements -, may itself help speed up Libra’s regulatory acceptance.
In other words: Libra might be positioned as the “western answer” to the Digital Yuan.China itself has been at the forefront of mobile payment adoption, currently mostly non-crypto, led by tech companies such as WeChat Pay and Alipay. The success of these non-crypto based payment platforms, which have allowed consumers and retailers to seamlessly transfer payments without the need of using traditional banking systems, have put Chinese banks in the position of the cut-out middleman. And again, in order to use the Alipay / WeChat Pay digital payment services, consumers first need to deposit funds into those digital wallets, charged with deposit and withdrawal fees. Exactly like I’ve predicted (first bullet point) what’s going to happen with international importing retailers acquiring the Digital Yuan, the Chinese consumers currently using WeChat Pay and Alipay are incentivised - because of those deposit / withdrawal / transaction fees - to NOT switch back to fiat funds (held at traditional banks) again, but instead to keep their funds at WeChat and Alipay. This effect in turn opens up new business models for other financial services, serviced by WeChat Pay and Alipay, thus effectively circumventing traditional Chinese retail banks.
Those Chinese retail banks therefore have a vast interest to promote the use of Digital Yuan-based market adoption, at least within China, which will probably catalyse Digital Yuan usage first nationally (within China) and therefore soon also internationally, cross-bordered.
Reasoning “beyond”
When Libra was announced, I read a lot of posts and comments that were - to my opinion at least - overly negative about Libra, “because it’s created by Facebook”, because it’s centralised and therefore not a real crypto, because “the powers that be” will again re-claim their market hegemony, et cetera.
What I think is needed to get cryptocurrencies like Bitcoin but also Steem mass adopted, is to welcome new initiatives like Libra and China’s Digital Yuan, despite their centralised nature. I strongly believe that it’s projects like these that will “pull in” the masses, both organisations and individuals, that are not yet invested in nor using cryptocurrencies.
In order to fulfil the original Bitcoin vision, a mass-adopted, globally used, peer to peer payment system and asset class, without the need for traditional financial institutions to store and process transactions, we need “strong market forces” that steer towards, instead of away from, crypto usage, and help, one way or another, to create an ecosystem iterating onwards from the current financial status quo in which banks hold such a dominant position. That’s not going to happen based purely on ideology!
I like to think of cryptocurrency market adoption as a game of chess, in which every strategic move builds momentum towards a “winning situation”. In order to proceed away from crypto as merely a speculative asset, we need incentives for everybody - consumers, companies, banks, governmental organisations -, to experience the NEED for crypto. Both Libra and the Chinese Digital Yuan appear, to me at least, to provide that “perceived need”. I’m looking forward to both being released and used! Interesting times!
What do you think about the influence of projects like Libra and China's Digital Yuan to the world of cryptocurrencies? Do tell me, in the comments section!
Thanks for reading!
@scipio
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It is not going to be easy for Libra to move on, as the whole western community that is actually balancing the money flow are feeling that they are threatened, which is somehow true. Especially the national central banks will have to think about (like China is doing) how to adapt to this kind development because the best way would be to allow Libra to live under the same control as new central bank digital money and give Libra enough competitors.
Agreed, there has been quite some "fuss" happening regarding Libra since it was announced, I've never seen such "governmental attention" to any crypto project before ;-)
Yet I think, the Digital Yuan both is/was inspired by Libra developments and it might improve Libra approvals to "not miss out" from a western point of view. It can also be that the EU and/or USA will issue their own dUSD / dEUR token & blockchain? Who knows! Interesting times, to see the least!
Thanks for commenting!
곰돌이가 @jayplayco님의 소중한 댓글에 $0.023을 보팅해서 $0.017을 살려드리고 가요. 곰돌이가 지금까지 총 6571번 $75.487을 보팅해서 $85.522을 구했습니다. @gomdory 곰도뤼~
It is demonstrable that digital currency enables subjection of individuals to totalitarian control financially. Therefore, no matter how existential the perceived need - indeed, the more powerful the engineered need the less I will be likely to adopt it - I will invest in other mechanisms. I don't need to buy from China. I don't seek to further globalization. Like money in Yap, I have found that the the greater amount of resources I accumulate in currency, the greater the burden of obligation weighing on me.
The vision of BTC that was sold to the market was of a decentralized control of storage and transfer of financial value. It has proved to be exactly the opposite, and both Libra and the coming Yuan are being provided by the most totalitarian entities today extant. Mark Twain said that it is far easier to show someone that another is attempting to fool them than it is to convince them they have already been fooled. He was right, and adopting any financial mechanism put forth by the extant powers that be expecting greater decentralization to result reveals the truth of Mark Twain's adage.
Traps are always easy to fall into. Falling out of them once you're in one is not even possible. Avoiding a trap in the middle of the road may be inconvenient, but it is the only way to remain free.
Reading your comment I think it's safe to conclude you won't be considered a Libra or Digital Yuan "fanboy" ;-). And while I agree to your remark of the original Bitcoin vision where a decentralized ledger allows for a trustless ecosystem where value can be stored, transferred and managed by individuals (i.e. "Be Your Own Bank"), it could also be reasoned that not everybody in the world (the elderly for example) are able to properly self-manage their own funds. Just think about a very realistic scenario where somebody loses - for one way or another - access to the majority or even all of their funds, and nobody in the world is able to help them recover said access.
Having multiple "tastes" / variants of crypto, digital assets, is a good thing, I think. Being able to make a choice which portion of your funds you want to manage yourself, and to place in the hands of a trusted party / custodian, whether or not a currency is issues centralized or decentralized, is always a good thing, I think.
Theory (e.g. "be your own bank") is one thing, practice is another. Decentralized consensus absolutely has its advantages, but arguably also its disadvantages (efficiently moving forward, being decisive, for example).
I personally welcome any initiative that adds more options to the table!
Oh, you mean me, here on Steem. A cursory examination of my wallet will reveal I am the poster boy for that financial harm.
As to whether centralized digital currency adds options to the table or not, I reckon that is self evident. China is not going to promote decentralization, and neither is Zuckerborg. Any initiative that poses as an alternative to central banks but actually centralizes control - and establishes greater financial control, as DLTs do - is contrary to the freedom BTC was claimed to offer. These currencies are wolves in sheep's fleece.
The problem is everyone (like every government) wants blockchain to succeed, but same time they want to ban the crypto currencies.
I know both are different but still, twe need to support all the projects coming up in this space because the future is bright :)
Hey @codingdefined, nice to hear of you again, how have you been?
I think the root problem is that different people want different things to succeed, depending on their own position. And that situation occurs even within a project and/or group of people. For example Steem itself: suppose person A on Steem invested 1 BTC to buy 10,000 STEEM tokens with, end now because STEEM price has fallen against the Bitcoin can only sell those 10,000 (maybe now due to inflation 11,000 tokens) for 0.16 BTC: that's 0.84 BTC gone, for this person. And person B did the opposite: sold 10,000 STEEM in exchange for 1 BTC and is now considering re-investing that 1 BTC to buy back 60,000 STEEM tokens.
Person A at this point wants STEEM price to go up, person B right now wants price to come down.
It's all dependent on one's current position and outlook.
This type of interpersonal preference divergence occurs in many aspects of life (not just crypto), but one specific additional problem exists in the cryptosphere: decentralisation, decentral control, needing consensus. One the one hand that "feature" is very interesting as it doesn't require a strict dependency on one entity to steer an organization. But on the other, it can also lead to being indecisive, as it takes some convincing to meet likeminded people to work with and make things happen.
And this is just one relatively trivial aspect, of crypto and blockchain. I could write several essays, books even, about this topic, but let's not do that in this one comment! ;-)
This is actually really the first time of that I have heard about all of this you know. I have the feeling there are so many crypto developments going on in the East which we really have no clue about (damn I live under a rock..I dont even know AliPay haha)
Well, I haven't been there recently, but I have been doing some research online and it appears to be completely mainstream in the far East to use (non-crypto, as of yet) mobile payment solutions instead of using cash or a bank account debit card.
But seriously, a World Traveler like yourself hasn't heard about these mobile payment solutions in Asia? Did I seriously just now introduce you to this phenomenon? It's YUUUGE! ;-)
Yeah I guess the more you travel the more you miss what goes on technology-wise in the world. I only learned about Tikke until last year you know...old school :D
But uhhhh, yeah are most of these Eastern crypto adaptions only available there then as well, or also worldwide? Because I know from the chinese version of facebook mostly only available there, but I would believe it it there would be more of these kinds of things
Yes that's the WeChat platform you're referring to. It's like Whatsapp and "Tikkie" combined into one, but huge. When using a taxi service for example you're encouraged to use it instead of cash payments.
But like I've argued, the Chinese retail banks are currently left behind, so they have a real use case to "fight back" and re-win their position by promoting the Digital Crypto Yuan ("Yen", as we call it). Such a system can - as opposed to a more "local" platform like WeChat - indeed be used dominantly internationally, because your retailer, purchasing your sneakers, and shirts and everything produced in and imported from China, has to / is able to pay for those goods using the Digital Yuan, and therefore has an incentive, to bypass crypto-to-fiat conversions to accept crypto payments in Switzerland, and Holland for example, from consumers themselves...
If the Chinese can't control something they typically do try to ban it. It's just their nature.
I've tried to explain in this article of mine that a Digital Yuan might improve crypto adoption & usage...
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Serious Crypto stuff goes over my head a bit, but nice to see you are still posting somewhere 👍
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Hugs from Cumaná-Venezuela, I wish you many successes in your publications and evaluations of them on hive. From my heart, everything is very good for you and your team. God bless you. Congratulations.
@scipioApart from the abuser, you are a coward.
You have a discussion with me because you are an unpleasant abuser of the platform and how you lost because you have no base, you come here and give me a flag.
But you have a big problem. First, I am no longer interested in Steemit and the rat flags as you speak well of me ... second, prepare another banner for the publication that I will publish talking about your person ... if you are not an unpleasant and unpleasant cowardly vomit. I invite you to answer me ... rat ... the rat discusses in whaleshare and puts a flag on steemit ... hahahaha ...
the same post that I write here referring to your unpleasant person I will do it in whaleshare that there you have no flags ...
whoever votes for this person who knows him before and if he is not immoral like him he will stop voting for him