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China and the U.S. Are Racing – Albeit Slowly – to Create a Global Digital Currency By DailyCoin

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China and the U.S. Are Racing – Albeit Slowly – to Create a Global Digital Currency

Although the U.S.dollar has been the world’s reserve currency for many decades, that might soon change. China has quietly been developing its Central Bank Digital Currency in 2014 (CBDC). This is an enhanced, digital version of the country’s yuan. And this year, the People’s Bank of China launched a real-world beta test of its CBDC in more than 30 major cities to iron out any bugs. It even ran a raffle to distribute digital wallets worth 200 Yuan (31.1 USD) to over 200,000 people to help jumpstart adoption.

In the recent years, several countries also have conducted small-scale test launches of CBDCs, such as the etkrona (Sweden) and the etso (Uruguay). France, Brazil Brazil, Canada and Russia are all currently exploring CBDC projects. However, nothing has reached the scale of China’s CBDC rollout.

A source connected to the U.S. Treasury Department, who spoke exclusively to me on condition of anonymity, says China’s CBDC aspirations are an attempt to become the world’s future digital currency.

According to the source, “we know that China’s CBDC’s progressivity is much lower than originally thought.” It’s not a brand new CBDC. Instead, it is a digitalized yuan. While we are certain that China is trying to undermine the status of the dollar as a global reserve currency, the ECNY (digital yuan), doesn’t have any idea how efficient it will do.

What China’s launch means for a U.S. digital dollar

U.S. Federal Reserve Chair Jerome Powell was not worried either during a Sept. 22 press conference when he was asked if he had any concerns about China’s head start in this global digital currency race.

Powell stated, “I believe it is important that we reach a point where we can make an educated decision about this and act quickly.” Powell said, “I do not believe that we are in the back. This is more important than doing it quickly. Our reserve currency is the global one. “And I believe we are in a great place to do that analysis, and take that decision.”
He stated.

Powell said that the Fed was working on a paper which will help inform the Fed’s decision to launch a U.S. CBDC. It could be available in the next few days.

Powell confirmed that Powell was planning to release a discussion paper shortly. This will serve as the foundation of a period for public engagement. Powell stated that this would serve as the ultimate test. [that]When assessing digital currencies and digital innovations at central banks, the following will be considered: Are there tangible and clear benefits that exceed any risks and costs?
The benefits of having a digital currency that is fed-backed by the Federal Reserve include faster and cheaper financial transactions, and quicker distributions of federal funds like Social Security benefits and aid. According to the FDIC’s 2019 How America Banks survey, there are about 7.1 million unbanked households in America. So the digital dollar could also be a way to boost economic equality for these folks, too — most of whom have mobile devices, which would be a primary CBDC access tool.

But, some CBDCs’ strengths can also be criticized by critics. CBDCs are not crypto-coded, so they’re not anonymous, and they will likely originate on a government-run blockchain. It would track the movement of digital money, which would allow it to be used for counterterrorism and money laundering. Government workers would also have access to all transactions.

Federal and U.S. tax agencies may be able to track transactions that are taxable and make automatic payments without prior notice. Also, depending on which political party is in power, the government could conceivably politicize CBDC payments such as by blocking payments to charities or religious organizations — or blocking CBDC use for certain goods such as birth control or bullets.

What’s next for a U.S. CBDC?

Even with these difficulties, the U.S. has many benefits over other CBDCs currently on the market or being developed. It is not only the global reserve currency but also its cash value, which makes it a universal currency among people and countries. These would be beneficial for the CBDC. The U.S. could also decide not to give foreign aid in U.S. CBDC if it wanted to promote quick adoption of its digital dollars. According to the Council on Foreign Relations, such a power play could ensure worldwide adoption. The United States has aid for more than 200 countries around the world.

It’s difficult to say with certainty if and when a U.S. CBDC could be launched, but it’s even more difficult to imagine the world’s largest economy and global reserve currency on the CBDC sidelines.

According to an anonymous Treasury source, the Fed has been doing a study. They are going to publish some research on the feasibility of either the U.S. CBDC, or the digitized dollar. However, I am bullish about a U.S. CBDC in the next 18-24 months.”
No matter what the future may hold for the U.S. CBDC’s, it will still be exciting to watch what happens and the impact that it has on cryptocurrency in general.

Flipside

  • While it might not look like this now, CBDCs could be an even more dangerous form of fiat money than the current sovereign monies.
  • Expect them to start mandating CBDC payments for all types of welfare and social program recipients first who won’t have a choice but to accept it with some type of premium incentive – say 10% more per month if they just accept CBDC.
  • You can expect it to be extended to government and military workers. At first, they will be able choose but in the future, this will become a standard form of government pay.

Why you should care

CBDCs mean one thing – control. Governments that deploy CBDCs will present them initially as a convenient “digital complement” to physical currency. As physical currency is gradually phased out and stopped being replenished, paper currency will also wear out. If you embrace digital curreniences – strive to avoid CBDCs at all costs, because they will likely cost you more than we can currently imagine in the long run.

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