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Fearing China's supremacy, global central banks unite to launch a digital currency

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Fearing China's supremacy, global central banks unite to launch a digital currency

Economie| 09:07 - 10/10/2020




Follow-up - Mawazine News

On Friday, a group of 7 major central banks, including the US Federal Reserve, set out to define what a digital currency would likely look like, to help catch up with a pioneering role for China and outpace private ventures like the stablecoin of Facebook's Libra.
Central banks and the Bank for International Settlements said the key features should include durability, availability, at low or no cost, appropriate standards, clear legislative framework, and an appropriate role for the private sector.
The growth in non-cash payments since the lockdown measures were imposed to combat the Corona pandemic, said John Cunliffe, deputy governor of the Bank of England and head of the Payments Committee at the Bank for International Settlements, that the growth in non-cash payments since the imposition of lockdown measures to combat the Corona pandemic, is accelerating how technology can change forms of money.
Central banks have begun closely examining digital currencies, after Facebook last year announced its Libra currency, which has yet to be launched, and will be backed by a mix of major currencies and government debt.
Since then, the entity behind Libra has modified its plans and is now hoping to launch several "stable currencies" backed by single currencies.
Cunliffe added that central banks need to keep pace to avoid the private sector closing payment gaps in inappropriate ways.
In addition to the Federal Reserve (the US Central Bank) and the Bank of England, the seven banks that have allied with the Bank for International Settlements include: the European Central Bank, the Swiss National Bank, and the Bank of Japan.
China is already testing a digital yuan, while the People's Bank of China says it will further spread the yuan in a currency world dominated by the dollar.

On Thursday, Kenji Okamura, the top Japanese diplomat involved in financial affairs, said that China is seeking to gain the leading advantage in building its own digital currency, warning that "this is something we should be afraid of."

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Consultations between 19 European countries on the issuance of a "digital Euro"




Information / follow-up

The European Central Bank announced its readiness to launch public consultations and tests tomorrow, Monday, in an effort to decide on the launch of a "digital euro" in the 19 single currency countries.

The move comes at a time when the (Covid-19) outbreak is accelerating the abandonment of banknotes, while policymakers are anxiously watching the rise of private cryptocurrencies such as Bitcoin.

The digital or virtual euro will be an electronic version of euro banknotes and coins, guaranteed by the European Central Bank.

For the first time, it will allow individuals to deposit directly with the European Central Bank, which is a safer way than depositing money with commercial banks that may go bankrupt, or keeping banknotes that may be stolen or lost.

Similar to cash, money can be kept outside the banking system, in a "digital wallet", for example, that would allow individuals and companies to make everyday payments in a fast, easy and secure way.

The bank stressed that "the digital euro will complement and not replace money, and digital amounts can be issued or transferred using the account records technology known as blockchain, which is a public database that cannot be revised, adopted by cryptocurrencies." 25 n

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Is the money age over? Central banks consider launching "digital currencies"

Monday 12 October 2020 - 10:32


Many central banks around the world have begun to study the possibility of launching digital currencies in a move that could mark a turning point in the world of payments, which has been dominated by money for more than 3,000 years.

More recently, the European Central Bank (ECB) has launched a "digital euro" test, the results of which will be released by the middle of next year, while the Swedish Central Bank will continue and make a decision on the digital krona by February.

A few days ago, a group of seven central banks led by the U.S. Federal Reserve (Central Bank) issued a general framework outlining the characteristics of cryptocurrencies.

Other dimensions of the digital yuan

China's central bank was a leader in this field, starting digital yuan experiments in several Chinese cities earlier this year, and in recent days began issuing 10 million digital yuan randomly to test the digital payment system in yuan, and according to some experts, the success of the digital yuan experiment may support Beijing's efforts to reduce its dependence on the U.S. dollar.

Motives for trending for digital currencies

Central banks' orientation towards cryptocurrencies can be explained in two directions: the first is to keep pace with the age of technology and the need for consumers to have a digital payment system integrated with their digital lives.

This is beginning to be evident in the growth of electronic payments, for example, in China, 81 percent of smartphone users turn to telephone payment systems.

In Sweden, the world's least cash-use country, only 1 percent of GDP is in cash, while Britain has exceeded the volume of payment card payments for the first time in the past year.
Coronavirus accelerates steps

It is true that the digitization of payments has been growing rapidly, but the emergence of the Coronavirus has accelerated this process, with people trending to reduce the use of money for fear of catching up with the virus and the significant growth in e-commerce volume, which jumped in April alone by more than 209 percent.

Payments company PayPal added more than 7.4 million users during the same month, and more than 13 million people in Latin America in the first quarter used their e-shopping credit cards for the first time.

What are cryptocurrencies different from cryptocurrencies?

Another reason for adopting cryptocurrencies is that central banks may seek through this move to pull the rug out from under the feet of cryptocurrencies that differ from cryptocurrencies as decentralized currencies that support anonymous transfers without the need for a broker or a central bank, which eliminates much of the role of central banks and financial institutions.

Facebook's plan to launch its cryptocurrency Libra prompted central banks to think about cryptocurrencies, after what happened was a message to them: if they don't think about creating a digital currency, someone else will. With more than 2.7 billion Facebook users, it was worth thinking about.

Digital currency... Benefits and concerns

Like any other technological invention, cryptocurrencies provide a range of benefits to users and administrators alike, as well as facilitating payments, enabling small firms to strengthen and spread their businesses and allow governments to monitor fraud and tax evasion. At the same time, however, it raises a range of concerns, most notably the risks of cyberpiracy and the potential exploitation of people's data.
Does money become a thing of the past?

Deutsche Bank ruled out the end of the entire money era, as these currencies would remain a means of preserving value in times of uncertainty over the coming years and decades from the bank's point of view, and in a survey conducted by the Bank in advanced economies, one-third of respondents said they still saw money as the preferred means of use, while more than half ruled out the full expiration of money.هل_انتهى_عصر_النقود.._بنوك_مركزية_تفكر_بإطلاق_عملات_رقمية

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