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Could China’s DCEP ‘jeopardize’ US standing on world stage?

  • China , with its central bank digital currency, dubbed, ‘DCEP‘ is advancing its development toward replacing coins, banknotes, and other money equivalents. China had recently implemented a law on January 1st, 2020 that aimed to govern password management, as part of its plans for DCEP’s release.

While rumors regarding the development of a Chinese CBDC gained traction after Facebook unveiled the contentious Libra coin, according to the President of Chamber of Digital Commerce, Perianne Boring, however, China has been building DCEP for at least five years.

In the latest episode of The Scoop, Boring said that there is absolutely no question whether China is the leader in blockchain tech and CBDC. She went on to say that the US “has so much to lose if it just cedes its technological leadership to any other jurisdiction”.

Boring claimed that the idea behind pushing for a digital dollar is not because the US does not want to lag behind China. The argument, according to her, is “protecting national security”. She elaborated,

“The dollar is constantly under attack by many countries around the world. One of the ways the dollar is being attacked is through technology. And if we do not have the best technology that’s underpinning our financial system and another country leap-frogs our infrastructure, that could very well jeopardize our standing on the world stage.”

Countries like South Korea and Japan have also jumped on the CBDC bandwagon. South Korean central bank is all set to launch a second CBDC team. Feeling the need to keep up with the development of the Chinese Yuan, top Japanese lawmakers have urged their government push for ‘Digital Yen’ on the G7 agenda for 2020.

Unlike China, the US is still in the process of researching the whole CBDC idea. Governor Lael Brainard, recently said that the US Federal Reserve is still examining the potential of the digital dollar and also revealed “collaborating with other central banks” as they “advance our understanding of CBDCs“.

While stating that the US should be focused on being the leader in this space, Boring added,

“There’s a lot of intense conversations happening right now between the United States and China, broadly. Where blockchain fits into that, or if it even fits into that- it was not a part of the trade deal that we just finalized, but there – the United States, in general, has a lot of issues with the Chinese government and the Chinese economy. What I think we really should be focused on is being a leader in this space.”

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Bank of Japan Deputy Governor Amamiya: Cheaper CBDCs could stifle private sector innovation

  • BoJ deputy governor foresees CBDCs affecting countries’ financial intermediation due to a shift in funds.
  • Central banks have to learn the pros and cons of CBDCs and seek ways to mitigate the risks.

The deputy governor of the Bank of Japan (BoJ) Amamiya in recent remarks says that central banks are bound to remain lenders of some kind even at the time when digital currencies are issued. Therefore, there is a need to carry out a monetary policy through the control of digital money flows.

Amamiya believes that central banks considering issuing their own digital currencies around the world should “conduct a comprehensive study on how it affects the country’s settlement and financial systems.” The deputy governor also warned against issuing cheaper central bank digital currencies (CBDCs), which is likely to stifle innovation in the private sector.

Moreover, if we reach a point where households and businesses start to prefer CBDCs over bank deposits then that could affect countries’ financial intermediation through shift in funds. Lastly, Amamiya said that central banks must seek to learn the pros and cons of CBDCs and explore ways on how to mitigate the risks

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No Cigar: Coronavirus Outbreak Forces China to Delay Digital Currency Plans

Despite the efforts to contain the coronavirus outbreak of COVID-19, the epidemic continues to cross the globe, with many other countries reporting relatively substantial spreads of the virus.

In South Korea, for instance, the number of cases has reached 1,600, from the sub-100 count seen just a week ago, and in Italy, too, the coronavirus is rapidly spreading.

Understandably, this has started to affect many facets of the world’s economy and daily living — Bloomberg reported that the count of visitors arriving in Hong Kong is down over 90%, companies like Apple and Samsung have started to see the outbreak affect their business, and many across the world have been forced to stay home from work and school amid the unrest.

The damaging effects of the outbreak were accentuated on Tuesday, when a Chinese state-run media outlet confirmed that the coronavirus has hampered the development of the People’s Bank of China’s (PBOC) digital currency plans.

Chinese Media: Digital Currency On Hold as Coronavirus Spreads

If you’ve followed the crypto news cycle over the past few months, you’ve likely seen the near-incessant stream of reports that China’s central bank, the PBOC, is on the verge of launching its own digital currency, branded the “DCEP” by reports from local media.

In fact, a December report from Caijing, which cited individuals familiar with the PBOC’s operations, suggested that the central bank was going to roll out a pilot program for the national crypto asset at the start of 2020 in Shenzhen and another municipality.

Despite other reports corroborating the idea that the PBOC was done the base layer development of their digital yuan, nothing came of the Caijing report and others like it. The reason: coronavirus.

According to a recent report from The Global Times — an English news outlet closely affiliated with the Chinese Communist Party’s de-facto media mouthpiece, The People’s Daily — “sources close to the matter” say “China’s research into its sovereign digital currency has been delayed from the first quarter due to the outbreak of the coronavirus.”

The source elaborated that the outbreak has forced staff of the PBOC and of other government institutions to stay home and avoid certain activities, “which weighs on the development process.”

This was further confirmed by Shentu Qingchun, CEO of Shenzhen-based blockchain company BankLedger, a company that The Global Times claims is involved in the launch of DCEP. Shentu purportedly said while the PBOC intended to make an announcement regarding the digital currency in Q1 2020, the chances the “announcement could be made on time are slim.”

Those interviewed by the outlet remain largely optimistic, however, affirming their support for the project and suggesting that the launch of the digital currency is likely still on track to take place sometime this year.

Other Effects Are Being Felt

The coronavirus outbreak has been affecting the cryptocurrency and blockchain space in other ways.

Over the past few weeks, even as BTC’s price has shot higher from the $6,400 December bottom, the hash rate of the Bitcoin network has stagnated around 110 exahashes per second. While this metric is still nearly triple that seen one year ago, the stagnation began when the coronavirus began hitting mainstream media headlines in the West, around the start of January.

This suggests the coronavirus is slowing the efforts of Bitcoin miners to expand their operations; indeed, as explained in a previous Blockonomi report, Jiang Zhuoer of BTC.Top revealed that the police had shut down his mine due to the coronavirus.

Also, crypto conferences have been delayed, as have conferences in the traditional tech world. Most notably, Token2049 — a Hong Kong conference that this writer intended on attending this March — was pushed until October.

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Bank of Japan Deputy Governor Amamiya: Cheaper CBDCs could stifle private sector innovation

  • BoJ deputy governor foresees CBDCs affecting countries’ financial intermediation due to a shift in funds.
  • Central banks have to learn the pros and cons of CBDCs and seek ways to mitigate the risks.

The deputy governor of the Bank of Japan (BoJ) Amamiya in recent remarks says that central banks are bound to remain lenders of some kind even at the time when digital currencies are issued. Therefore, there is a need to carry out a monetary policy through the control of digital money flows.

Amamiya believes that central banks considering issuing their own digital currencies around the world should “conduct a comprehensive study on how it affects the country’s settlement and financial systems.” The deputy governor also warned against issuing cheaper central bank digital currencies (CBDCs), which is likely to stifle innovation in the private sector.

Moreover, if we reach a point where households and businesses start to prefer CBDCs over bank deposits then that could affect countries’ financial intermediation through shift in funds. Lastly, Amamiya said that central banks must seek to learn the pros and cons of CBDCs and explore ways on how to mitigate the risks.

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