Twelve years ago, when the world was still breathing in the aftermath of the financial crisis, Satoshi Nakamoto took the Bitcoin white paper and sneaked in from the gap torn by the crisis; 12 years later, it was another crisis that shocked the world. However, the gap this time has become a formalized trail, crowded with central banks and Internet giants eager to try.
In the unprecedented changes, under the risk of high inflation, before the snowball of debt is getting bigger and bigger, everyone is looking for the next possibility of currency. However, haste is not enough. Just as Fed Chairman Powell said, “It is more important to make comparisons first.”
Entry
More than a month later, the Reserve Bank of Australia (RBA, hereinafter referred to as the “RBA”) was “faced”. On November 2, local time, the Reserve Bank of Australia announced that it would launch a project to study the potential use and significance of central bank digital currency (CBDC) in the form of wholesale distributed ledger technology (DLT).
Specifically, the project will involve the development of a proof of concept to issue a symbolic form of CBDC that can be used by wholesale market participants for the loan, settlement and repayment of syndicated loans on the Ethereum-based DLT platform. The project is expected to be completed around the end of 2020, and relevant agencies plan to release a report on the project and its main findings in the first half of 2021.
To this end, the Reserve Bank of Australia and the Commonwealth Bank of Australia, National Australia Bank, fund management company Perpetual, and blockchain technology company ConsenSys Software are cooperating on the project.
This is far from what the Reserve Bank of Australia has always stated. In September, the Reserve Bank of Australia made it clear that it refused to join the trend of developing and issuing CBDC. In the view of the Reserve Bank of Australia, the current policy reasons for issuing CBDC in Australia are insufficient. The country’s efficient and real-time new payment platform has been successful. In addition, despite the general decline in cash usage, Australians did not give up paper money as quickly as the Swedes.
Earlier in January, the Reserve Bank of Australia’s assessment was that “the cryptocurrency seen so far does not provide the usual functions of currency, which explains why it is not widely used as a means of payment in Australia.” As for CBDC, Australia The Fed said it is not necessary at this time.
The change has come too fast, and the Reserve Bank of Australia has now put the study of CBDC on its agenda. After all, the “unnecessary” at the time has become the outlet for countries vying to enter the game.
After the large-scale digital renminbi experiment in Shenzhen, China, the Bank of Japan felt the crisis and announced that it would advance the digital currency experiment. On October 9, the Bank of Japan released the latest digital currency report, stating that it will conduct a feasibility study of digital currency in the 2021 fiscal year (that is, starting from April 2021). Like Japan, the Bank of Korea also stated that it will start CBDC testing in 2021.
A few days later, the Central Bank of Russia released a report called “Digital Ruble” on its official website on October 13, stating that the central bank is currently evaluating and studying the feasibility of the “Digital Ruble” project, and end users can The ruble is stored in its electronic account and can be used on both online and offline terminals.
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From the 180-degree change of the RBA’s attitude to the cautious test of Japan, which promotes cash, there are more and more players on this global CBDC track. According to a statistical data from the Bank for International Settlements, at least 48 central bank institutions are currently conducting research and proof of concept related to central bank digital currency.
This is probably something that Satoshi Nakamoto never expected 12 years ago. In 2008, after the development of encryption technology for decades, a person who called himself Satoshi Nakamoto published “Bitcoin: A Peer-to-Peer Electronic Cash System”, which described the embryonic form of cryptocurrency-simply by online payment Without any financial institution, money can be sent directly from one party to the other.
Since then, the value of Bitcoin has fluctuated from $0.2 to $20,000. Under the huge volatility, Wall Street sneered at this. In September 2017, Dimon, CEO of JPMorgan Chase, known as the “King of Wall Street”, angrily denounced Bitcoin as a “scam” and warned employees that anyone who wanted to scramble Bitcoin would be fired directly.
“It is almost certain that digital currency will eventually end in tragedy. I will never hold any digital currency myself. But in what form the tragedy will appear, I don’t know.” In January of the following year, Bitcoin was born ten. Years later, the stock market Buffett said with certainty.
Some people regard it as a scourge, while others are willing to accept it. Now with the further development of blockchain technology, this market has long been not limited to Bitcoin, but has grown in scale. As of September 6, 2020, there are 6,941 currencies in the global digital currency market, with a total market value of approximately US$329.7 billion.
In June 2019, Libra turned out to be a catfish that stirred the currency pool, adding a strong touch to the legalization of digital currency. On the 18th of that month, Facebook’s cryptocurrency website calibra.com was officially launched. Anchoring a basket of currencies consisting of multiple legal currencies, with the support of 27 service organizations such as MasterCard, Visa, and PayPal, plus Facebook, which has more than 2 billion active users, Libra’s prospects cannot be underestimated.
Facebook is not the first giant to fancy digital currency legalization. Prior to this, Amazon had already begun testing the access of AFcoin landing applications; afterwards, Japan’s Rakuten also announced the launch of the long-awaited encrypted digital currency transaction application and exchange service.
“The transition to digital currency is inevitable. Digital currency has obvious advantages in financial inclusion and payment efficiency, speed and flexibility, and the government’s ability to quickly pay citizens.” PayPal President and CEO Dan Schulman once said. . Just last month, PayPal has obtained the first conditional cryptocurrency license from the New York State Department of Financial Services, allowing users to hold, buy and sell digital currencies, and will also allow users to use digital currencies at 26 million merchants on the platform Make shopping settlement.
Even JP Morgan Chase, who once disliked Bitcoin most, is “really fragrant.” Last month, the head of JPMorgan’s global payment business confirmed that JPM Coin, the digital currency of JPMorgan Chase, will be used for global payments for the first time. Large technology customers have begun to use JPM Coin.
Anonymity, decentralization, non-tampering, cross-border flow, total volume control… many advantages make digital currency more and more popular for online transactions. This advantage is even greater in Latin American countries. Under the economic difficulties of rising prices, currency depreciation, high unemployment and inflation rates, encrypted digital currencies are beginning to be sought after as a substitute for legal tender.
According to a survey, 73.4% of the Argentines interviewed said that in the current economic situation, digital currency is the most effective way to save. The 2019 survey showed that among the top seven countries where digital currencies are most commonly used, Latin American countries occupy five seats, namely Brazil, Colombia, Argentina, Mexico and Chile.
“First” or “right”
The point-to-point transmission method that bypasses the central bank payment means that transactions are more convenient and faster. If this transaction method is launched by an Internet giant with hundreds of millions of users, the sense of crisis for central banks in various countries will also arise.
Libra was strangled in the cradle shortly after its birth. Last July, Powell confessed that Facebook’s Libra plan cannot move forward unless it eliminates concerns about privacy, money laundering, consumer protection, and financial stability. U.S. President Trump even bluntly stated that Libra has almost no reliability. “In the United States, there is only the US dollar, which is unprecedentedly powerful, reliable and trustworthy.”
Until now, Libra has still made no progress, but the tolerance of central banks seems to have increased, and even started to take this trip in person.
However, compared with Libra and PayPal, Postbank researcher Lou Feipeng pointed out that the central bank’s digital currency is currency digitization, which is backed by national credit. This is the biggest difference. “The emergence of central bank digital currency is inevitable for economic and social development. The central bank’s trial of digital currency is to optimize financial infrastructure, improve transaction efficiency and the effect of macro-control policies.”
Fan Mingtai, a researcher at the Institute of Quantitative and Technical Economics of the Chinese Academy of Social Sciences, also expressed a similar view. Now that the central banks of many countries start digital currency projects, there may be two main considerations. On the one hand, related developments in the digital economy require the support of digital currency to facilitate digital transactions, which is the most important; on the other hand, central bank digital currency can also have regulatory functions. In contrast, Bitcoin and other common encryption Currency cannot achieve such a function.
The temptation is always cautious. Even though the expansion of digital currency technology trials was announced in August, at the International Monetary Fund’s annual meeting last month, Powell still emphasized that given the importance of the U.S. dollar, it is important to the United States in the development of any cross-border digital currency. In other words, “It is more important to make comparisons first. To be right means that we must not only look at the potential benefits of CBDC, but also see its potential risks, but also recognize the important trade-offs that must be carefully considered.”
According to Powell, faster international transactions, cheaper fees, boosting a cashless society, and modernizing payment infrastructure are the benefits of using digital currencies; however, the Federal Reserve must also consider the risks of cyber attacks, counterfeiting and fraud , And its impact on existing monetary policy and financial stability.
Regarding the concerns about digital currency, Fan Mingtai mentioned that the current development is still in the early stage. The most important thing is whether digital currency can exist without traditional currency. At the same time, because it is in the early stage of development, some digital risks have not yet been exposed. The laws and regulations have not yet been perfected. In addition, in terms of digital transactions, the concepts of total volume and net volume transactions are involved. In the future, whether total volume or net volume will be used for settlement is also a question. Moreover, the current decentralization may not be fully realized, at most real decentralization, but it is impossible to get rid of the network to achieve decentralization.
Lou Feipeng also mentioned that the central bank’s digital currency generally has conducted sufficient research, fully considered the potential risks, and is relatively cautious in launching. It is necessary to do a good job in public guidance so that the public has a correct understanding of this.
