China promotes central bank digital currency

Digital currency/electronic payment (DC/EP) is a central bank digital currency in development by the People’s Bank of China to replace paper money and cash transactions. This government-backed digital project is being gradually introduced to the public in China after a number of closed-environment trial tests, according to China news outlets jiemian.com and China Daily. Jiemian.com also reported five objectives of central bank digital currency, outlined by Zhang Chunxin, from his presentation at 2020 World Artificial Intelligence Conference held on July 10. Zhang is the deputy academic dean and a professor of Finance at Fanhai International School of Finance at Fudan University. The first objective is to improve transaction efficiency. Reduced storage costs and anti-counterfeiting capabilities enabled by the electronic platform would be especially beneficial to small businesses that traditionally rely on paper money. Secondly, being a sovereign currency, DC/EP is in compliance with strict regulations, making it less risky than private digital currency issued by, for example, Facebook. Having a stable unit of account, DC/EP will not fluctuate with market changes and business circumstances, officials say. Thirdly, all banks and financial institutions are able to adopt DC/EP and this will improve the overall consumption environment, they add. Fourth, smart digital currency is useful for implementing transparent and effective regulation. Because blockchain is traceable and tamper-proof, the use of money can be limited and monitored. Especially, it can be used against corruption, gambling, drugs, fraud, laundering, etc. Such supervision of financial data can enhance precision of loans and financing, which expands financing channels and increases lenders’ willingness to loan. Fifth, DC/EP makes financing accessible and inclusive to all. Digital wallet is compatible with interest-bearing currencies, small loans and credit loans. This can encourage consumption and stimulate economic activities. Under the context of the pandemic, Chunxin said that central bank digital currency could help allocate subsidies to the right people.

China promotes central bank digital currency

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