Though it already has a firm grip on the two commercial payment giants, direct control and oversight over a digital currency would provide much better data and the power to deny people access, he says. ![]() “The Chinese government wants more control over payments,” says Gladstein. Around the world, retail transactions are going cashless, and if cash becomes obsolete, governments will use CBDCs as tools for surveillance and control, argues Alex Gladstein, chief strategy officer at the Human Rights Foundation. Most central banks don’t want to have to do this kind of admin for millions of people, says Ananya Kumar, an associate director for digital currency research at the Atlantic Council.īut the PBOC’s desire to do just that explains why some civil liberties activists oppose the idea of CBDCs. For example, to prevent money laundering and other financial crimes, traditional banks require users to verify their identities. ![]() More than 100 countries around the world are exploring possible CBDC designs, and a big question they are wrestling with is how directly the central bank should be involved versus letting the currency be run by private-sector intermediaries. “Managed anonymity”Ĭhina is at the forefront of an increasingly global push to adopt CBDCs. The PBOC’s choice to connect directly with retail customers through its app is remarkable, because central banks typically deal only with other banks. It’s possible to access e-CNY through commercial bank apps, but it’s also possible through an app run by the PBOC. They could use e-CNY instead, according to Mu. Visitors to China from other countries also often have difficulty participating in the mobile-dominated payment system, where many vendors no longer take cash or even cards. On top of that, between 10% and 20% of people in China don’t have bank accounts and can’t access the commercial financial system, said Mu. If something ever goes wrong with them, “that will bring a very significant negative impact to the financial stability of China,” he said. Most people in China don’t use cash or credit cards but rely on their phones to buy things, so these commercial platforms have become “significantly important financial infrastructure,” Mu said. ![]() Mu said e-CNY will also serve as a necessary backup to the popular mobile payment apps Alipay and WeChat Pay, which dominate China’s daily retail transactions. Mu added that the e-CNY will broaden access to the PBOC’s payment system-extending it to, among others, more private-sector firms, including fintech companies and telecom operators. “Now we can provide 24/7 services to the general public,” he said during a talk he gave via Zoom for an event hosted last year by the Atlantic Council, a foreign policy think tank in Washington, DC. The next year it started the e-CNY pilot phase, which is still ongoing.Īccording to Mu Changchun, director general of the PBOC’s Digital Currency Institute, the e-CNY project has three main goals: to improve the efficiency of the central bank’s payment system, provide a backup for the retail payment system, and “enhance financial inclusion.” Then in 2019, after Meta (then called Facebook) proposed its own global digital currency, PBOC officials expressed concern that the coin, called Libra, might undermine the monetary sovereignty of China’s currency, the yuan. While Alibaba and Tencent launched their digital payment systems in 20 respectively, China began researching digital currency technology in 2014 and launched a research institute devoted to the concept in 2016, hoping to create a centralized alternative.
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