China has proposed creating a series of global rules for central bank digital currencies; these rules range from how they should be used in the world to their monitoring and information exchange, something that is considered sensitive given the control that it is intended to exercise. Many central banks intend to develop digital currencies to modernize their respective financial systems, and in this way, protect themselves from cryptocurrencies, which are considered by many central banks as a “threat,” especially Bitcoin. Another aim of this proposal is to speed up national and international payments.
Among the series of proposals presented by the Digital Currency Directorate of the People’s Bank of China (BPC) in an international payments seminar, they cite the following characteristics:
Interoperability between the CBDC (Central Bank Digital Currency) systems of the different jurisdictions and exchanges must be enabled; in this sense, the Chinese bank has shared proposals with other banks.
Cash flows and information
Regarding the flow of information and the flow of funds, it must synchronize them to make it easier for regulators to comply with security standards in the transactions carried out.
Platform for currency Exchange
Another proposal is a scalable and supervised currency exchange platform compatible with distributed ledger technology (DLT), blockchain, or other applicable technologies.
Thus, the Chinese Central Bank (PBOC or BPC) has as its main aim to become the first bank of its kind, to issue a CBDC (Central Bank Digital Currency) and to promote the internationalization of its currency, the Yuan, and in this way, reduce the dominance of the dollar in the banking system and the world economy.
Similarly, the European Central Bank (ECB) is in the exploratory phase of introducing a “digital euro” in the next five years. Still, the German Bundesbank opposes it and fears that a possible digital euro could be a risk in general for banking.
According to some Chinese economic experts, creating a CBDC with broad commercial acceptance in international payments could, to some extent, erode the power of the dollar as the world’s major trading currency and undermine the influence of the United States.
For its part, China assured that it will accelerate pilot programs to develop the digital Yuan and boost consumption for greater economic growth. The PBOC leadership added that a global rule should be the fair supply of digital currencies by all central banks globally and thus continue to support a healthy evolution and financial stability of the world monetary system.
The Chinese bank concludes that a Central Bank’s digital currency should not be an impediment to another Central Bank’s ability to carry out its mandate of financial and monetary stability.
What do you think about this topic? Do you agree with these Chinese central bank rules?
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