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Why is China determined to launch digital currency?

Central banks and regulatory agencies in various countries, including China, are paying increasing attention to digital currency.

As of mid-July, at least 36 central banks around the world have released plans for launching a digital currency, according to a report recently released by the Bank for International Settlements (BIS), an international financial institution owned by central banks.

(Photo/pixabay.com)

The raging COVID-19 epidemic has increased the demand for paperless transactions. Furthermore, a digital currency can achieve targeted allocation of relief funds during the outbreak.

Digital currencies can also help cut social management costs as well as costs generated by the issuance and circulation of traditional paper currency, make the payment and settlement process safer, more convenient and efficient, and better support economic and social development, said Zhou Maohua, an analyst at the financial markets department of China Everbright Bank.

Insiders pointed out that by speeding up the research and testing of digital currency, countries are actually fighting over a say in the field of science and technology. The digital currency that is first developed and put into standardized use may become a global standard, they explained.

With the continuous deepening information revolution and the rapid evolution of the digital economy, the international community and major economies have paid great attention to the development of central bank digital currencies (CBDC), said a recent report by the People’s Bank of China.

Sweden has entered the CBDC pilot test stage, and some economies are engaged in research and development, while others are verifying the feasibility of CBDC.

Based on its advantages related to digitization and security, CBDC can extend services to areas that traditional financial services are unable to reach through mobile app and network communications.

Unlike cash, which is totally anonymous, CBDC can achieve controllable anonymity, improving the efficiency and accuracy of identifying illegal and criminal acts such as money laundering, terrorist financing and tax evasion, while protecting users’ rightful privacy.

Zhu Min, chair of the National Institute of Financial Research, Tsinghua University, considers the development of digital currency an important field and channel for the internationalization of RMB.

Digital currency will become the commanding heights of future currency market competition, Zhu said, adding that as the world’s second largest economy and second largest financial market, China boasts a huge market for e-commerce and digital circulation, which makes the development and application of digital currency all the more important.

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