Say Goodbye to Banking as We Know It

[Hydrogen]

China is poised to launch the first national digital currency. There will be no counting the disruption.  

So is China readying its own Bitcoin? Banish the thought.

It’s far bigger than that. Yes, just like any other cryptocurrency — or for that matter, cigarettes in prisoners-of-war camps — the upcoming digital yuan will be “tokenized” money. But the similarity ends there. The crypto yuan, which may be on offer as soon as 2020, will be fully backed by the central bank of the world’s second-largest economy, drawing its value from the Chinese state’s ability to impose taxes in perpetuity. Other national authorities are bound to embrace this powerful idea.    

Little is known about the digital yuan except that it’s been in the works for five years and Beijing is nearly ready to roll. The consensus is that the token will be a private blockchain, a peer-to-peer network for sharing information and validating transactions, with the People’s Bank of China in control of who gets to participate. To begin with, the currency will be supplied via the banking system and replace some part of physical cash. That won’t be hard, given the ubiquitous presence of Chinese QR code-based digital wallets such as Alipay and WeChat Pay.

It may start small, but the digital yuan can disrupt both traditional banking and the post-Bretton Woods system of floating exchange rates that the world has lived with since 1973. No wonder that for China, “blockchain and the yuan digital currency are a national strategic priority — almost at the level of the internet,” says Sanford C. Bernstein & Co. fintech analyst Gautam Chhugani.  

Ever since the advent of the 17th-century goldsmith-banker in London, the most crucial thing in banking has been the ledger, a repository of irrefutable records to establish trust in situations where it doesn’t exist. When Peter in Vancouver agrees to send money to Paul in Singapore, they’re forced to use a chain of interlinked intermediaries because there’s no ledger in the world with both of them on it. Blockchain’s distributed ledgers make trust irrelevant. Paul devises a secret code, and shares its encrypted version with Peter, who uses it to create a digital contract to pay Paul. A cumbersome and expensive network of correspondent banks becomes redundant, especially when it comes to the $124 trillion businesses move across borders annually. Imagine the productivity boost; picture the threat to lenders.

China isn’t the only one experimenting. Fast, cheap cross-border payment settlement is one application of JPMorgan Chase & Co.’s Quorum, an Ethereum-based platform on which the Monetary Authority of Singapore is running Project Ubin, an exploration into central bank digital money. These are early days, but if blockchain technology shows promise in handling a large number of transactions simultaneously, then digital currencies could become substitutes not just for physical cash but also for bank reserves.

That’s when the game changes. Reserves at a central bank are maintained by deposit-taking lenders. A digital yuan — or Singapore dollar or Indian rupee — could bypass this system and allow any holder of the currency to have a deposit at the central bank, potentially making the state the monopoly supplier of money to retail customers. As Agustin Carstens, the general manager at the Bank for International Settlement, noted recently, “If the central bank becomes everybody’s deposit-taker, it may find itself becoming everybody’s lender too.”

But why would central banks want to demote their own banking systems? One answer, looking at Europe and Japan, is that negative interest rates are doing that anyway. Lenders are starved of profit because while the central bank charges them for keeping money on deposit, they can’t as easily pass on those negative interest rates to their own depositors. If the global economy gets mired in long-term stagnation, official digital currencies will at least be an efficient way of monetary easing without involving banks.

The other, more concrete, reason may be that technological progress is making the status quo untenable. It’s no coincidence that China hastened its national cryptocurrency after Facebook Inc. announced the Libra project, which was touted as an alternative dollar. Perhaps that was fanciful, and the Libra has hit a wall of regulatory concerns. But if they’re offered like Spotify gift cards at the local 7-Eleven, there will be demand for tokens that are acceptable across borders, stable in value against baskets of national currencies, and can be used in global trade and investing. Someone in Silicon Valley will eventually succeed, blowing away the fig leaf of monetary sovereignty in emerging markets in the process.

The changes won’t end with banking and monetary arrangements. Token transactions will be pseudonymous: If the central bank wants to see who’s spending where, it can. Anonymity disappears when cash does. While that will make life difficult for money launderers and terrorists, it could also become a tool to punish political activism. Meanwhile, currency as a foreign policy weapon loses some sting. Pariah states will covet a crypto they can access by circumventing banks that are terrified of flouting Western sanctions. As Harvard University economist Kenneth Rogoff notes, technology “is on the verge of disrupting America’s ability to leverage faith in its currency to pursue its broader national interests.”

A roller-coaster decade — not just for for banking and money but also for privacy and politics — may just be beginning.

https://www.bloomberg.com/opinion/articles/2019-12-29/china-has-edge-over-silicon-valley-to-end-banking-as-we-know-it

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According to this, china sped up development of its national digital crypto currency after facebook announced its libra plans and could release it in 2020.

One of the things that made america great was it being a previous hotbed of innovations and futuristic progress.

Today lawmakers appear determined to ensure america does everything within its power to oppose and obstruct innovations like bitcoin/blockchain/crypto.

While china and europe does the opposite. And so perhaps this represents a small microcosm of the paradigm shift taking place.

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[LeGaulois]

I don't know exactly when Libra was announced to the public but the fact is a lot of central banks have been working on digital currencies with different variants (CBDC) well before, probably since 2017-2018 at least. (https://www.bis.org/publ/bppdf/bispap101.pdf)

And contrary to popular belief, it's not necessary to go against Libra or Bitcoin or whatever. The buzz around Libra and cryptocurrencies may have sped things up, but the primary motivations are payment safety and domestic efficiency in the majority.



The American dream is gone for a decade or more. In the '90s yes but in 2020 nope. The dollar supremacy won't last for long
The banking system is really changing step by step, a radical change that has never been seen before. There will be those who will adapt to a new economic mentality and those who will become dinosaurs...
If Americans don't follow the trend they will belong to the dinosaurs, up to get excluded from other countries. This is the new face of the money

[Lucius]

I find this just another in a series of announcements about some new currency from China, and I think everything else is just speculation until it becomes reality. China will launch digital yuan, it will be on a private blockchain and it will be under full control of People’s Bank of China. At the moment, I believe that this is an internal matter of China and that it cannot affect the global financial system. It is very likely that all economic forces will launch their digital currencies at some point, this is inevitably the direction the world is moving, a complete transition to the digital age.

As for Libra, haven't the US and EU strongly opposed the project? I am not sure if anything has changed in the US, but the EU still firmly stands by its position that it will not allow Libra in this form as presented.

[squatz1]

So we think that China, the government with the most oppression in the world which spys on its Citizens through the usage of a points system and biometrics on a daily basis, is going to lead the way on digital currency adoption? Hell no, that's bullshit.

China wants to use this to spy on their people even further. The ONLY current way that people are able to skirt the governments eye is by using cash, but you can't do that if the country forces you to use, then they're going to continue to spy on the people. They're going to push cash out of the economy because you can't spy on cash but you can SPY on digital cash.

[moviebuff777]

This will most likely be the trend for most countries as they transition to the digital economy. But these government cryptocurrencies or digital currencies will still be centralized so they will not take the place of decentralized currency.

[ChrisPop]

Adopting innovations too fast and spending a lot of money into researching can result in a drawdown on the short term especially when if you live in a democracy. For example I'm sure that not everybody will be happy with the implementation of cryptocurrencies in all stores and encouraging people with making payments through it. Also businesses might be threatened by the demand of taking the learning curve to use blockchain & cryptocurrencies efficiently. That would mean serious changes in the way the company operates, accounting, relationship with customers and vendors, etc.

BUT in the long term they will open themselves to a whole new world of opportunities, cost-efficiency and transparency.

[Ozero]

Now many states plan to issue their national stable coin, even the figure is called that there are already about 70 percent of such states and this, of course, will change the world banking system. Stable coins of the states, which are their digitized national currency, combine the capabilities of cryptocurrency and ordinary currency. From this, the banking system will only get stronger.
Stable coins of the states, and first of all, a stable coin of the Chinese government, can become a serious competitor to a decentralized cryptocurrency as a means of payment. The Chinese government does not seek to create a second bitcoin. They create a fully controlled blockchain-based currency. Therefore, the global financial system will definitely change.

[boris singer]

there will be many changes from the global banking system if PBoC succeeds with CBDC and DCEP. In general this will change the direction of using e-money technically even though it is in a centralized system. If in the end this type of currency is more advanced and transparent, and on the other hand there are no technical things done by the US and EU at the same level, then the world economic system is possible to change direction, and Asia will begin to unite its vision in one economic zone.

[Harlot]

There banks will simply be more digitalized if this happens. I know that this will be a big leap but banks right now are technically on a semi-digitalized stage where we hace atm card and debit cards acting out as cash even without withdrawing fiat so I wouldn't see any big changes at here at all. The major change I see is in fact about the transparency and security it will bring since now the Chinese people will be transacting with their phones and not their wallet.

[avikz]

I don't know why many people are comparing the bank issued cryptos with a pure blood crypto like Bitcoin! China is planning for a Bank issued crypto which will be centralized in nature. The user experience will be very similar to the net banking/UPI transactions that we use very frequently today! Just the need of physical money will be reduced which will in turn help government to reduce a huge amount of expenses! Banking system will chage to accommodate this transition but the motive of banking will never change!

There's nothing to cheer about because China is not a traditional crypto friendly country.  Don't take them as an example! Rather US is more friendly to cryptos than China!

[Upgrade00]

In my opinion Bitcoin would always have an edge over this Chinese digital currency, and any other currency which is going to be launched. Apart from it's decentralization, Bitcoin is also borderless, hence, I can transfer money from anywhere in my country to anyone in the world and at anytime. If different countries create their own blockchain, which would take a while, it would take a longer while to connect the entire nations through a general (centralized) currency,
Also, fiat currencies can be digitalized, but that doesn't make it a 'crypto' currency, it doesn't offer anonymity and would just be another form of mobile banking.

On this news: It would not have much effect on the global cryptocurrency economy, as it's merely speculation at this point.

[target]

Its convenient for China to shift to blockchain and lead to set a new ground because they are rising up and the world now seem to be relying on them due to the money they have. And I guess the east will now have a big brother.

In my opinion Bitcoin would always have an edge over this Chinese digital currency, and any other currency which is going to be launched. Apart from it's decentralization, Bitcoin is also borderless, hence, I can transfer money from anywhere in my country to anyone in the world and at anytime. If different countries create their own blockchain, which would take a while, it would take a longer while to connect the entire nations through a general (centralized) currency,
Also, fiat currencies can be digitalized, but that doesn't make it a 'crypto' currency, it doesn't offer anonymity and would just be another form of mobile banking.

On this news: It would not have much effect on the global cryptocurrency economy, as it's merely speculation at this point.

They are not interested to cryptocurency economy, its about their national economy. Countries will have to acquire digital yuan in order to make transactions to China's economy.

[LUCKMCFLY]

China seeks prominence, they want to have the maximum, because their direct competition will be Libra, and it is clear that people around the world prefer and have more acceptance to the cryptocurrency of a social network than that of any country controlled by any government or bank.

Since the Chinese cryptocurrency will not have any fluctuation of market speculation like Bitcoin, it will remain at a stable controlled value, it is like having fiat money digitally used, total control and absolute centralization.

The United States postponed its launch of the digital dollar in approximately 5 years and approved Libra when they said that, provided they comply with financial laws, the Libra project can be implemented, everything will be fine, this after Mark said that Libra will help increase the economy American, remembering that the US dollar is one of the backs of the stable currency, the euro and NOT the Chinese Yuan.

[poptok1]

but the primary motivations are payment safety and domestic efficiency in the majority.

"Those who would give up essential Liberty (anonymity), to purchase a little temporary Safety (efficiency) , deserve neither Liberty nor Safety."
Basically your entire post is central and private Zio-banks propaganda, and if I could I would demerit you out of existence for propagating such utter nonsense that is in fact quite dangerous, with all those fancy graphs and charts some poor sobs have a chance to fall for it. That's extremely disappointing to see a legendary member displaying such careless set of sentences. For me it's a dis-qualifier, sort of like treason, a stab in to satoshis back and so on.
So, so many things have to change for things to stay exactly the same...
New face my ass! Looks like a pentagram-ish mark of the beast.
 

[adzino]

So we think that China, the government with the most oppression in the world which spys on its Citizens through the usage of a points system and biometrics on a daily basis, is going to lead the way on digital currency adoption? Hell no, that's bullshit.

China wants to use this to spy on their people even further. The ONLY current way that people are able to skirt the governments eye is by using cash, but you can't do that if the country forces you to use, then they're going to continue to spy on the people. They're going to push cash out of the economy because you can't spy on cash but you can SPY on digital cash.

This is exactly what I was about to say. The Chinese government are going to love crypto currencies because this is the only way they can spy and keep track of all  its citizen. They can easily control the financial aspects of their citizens. Digital currency is going to be heaven for the Chinese government. Sadly, people will lose all their financial freedom if the Chinese government completely replaces fiat currency with digital currencies.

[CryptoBry]

Today lawmakers appear determined to ensure america does everything within its power to oppose and obstruct innovations like bitcoin/blockchain/crypto. While china and europe does the opposite. And so perhaps this represents a small microcosm of the paradigm shift taking place.

In my view, America has already lost that capacity to be the leader for innovations and so right now instead of embracing new and better things many politicians are using their vested power to counteract them. In other words, Americans are failing to see the future and are now self=absorbed people. The same is not true with China, the country aiming for global domination in as many fronts as possible. And certainly, it wants to win the economic war eclipsing the power and influence of USA as soon as it is possible.

I am seeing a big potential in the digital yuan not really as the competitor of Bitcoin but as means for China to further its overarching vision and goals. Soon we are waking with the China dominance all over our face. With the kind of professionalism in planning and execution plus with the backing of enough resources, I am sure that this China project is coming our way.

This is not promoting China and its myriad of interests but a wake up call to the people of USA and other big countries.

[hatshepsut93]

As for Libra, haven't the US and EU strongly opposed the project? I am not sure if anything has changed in the US, but the EU still firmly stands by its position that it will not allow Libra in this form as presented.

If westerm governments are so opposed to a coin managed by private company, imagine how would they react to digital yuan coin - I'm 100% sure it would be banned there, exchanges wouldn't be allowed to list it, businesses won't be allowed to use it, funds won't be allowed to invest in it (or it will be very limited).

[panganib999]

I guess its time for China to be like:
Digital currency is legit money while Fiat money is Blackmarket money kinda thing? I mean, its plausible with them being the only one having digital currency at the moment. Plus, with them being alone on the scene, I doubt conversion of digital yuan to other currencies would be a hassle towards people who REALLY like taking advantage of things. Idk, was just an idea, might actually contain a lot of holes in it since I don't understand much regarding how they'd actually implement the system of Fiat >> Digital currency.

[sunsilk]

While I've been reading posts that China is only interested with blockchain and not with crypto but here they go launching their own crypto backed by the government. This should be the position of US before but seem they are ignoring the power and potential of blockchain and crypto.

Now, China is taking over the spot while they can before US takes place and gets first. They've been always in the economic competition like this and I guess this time China is ahead of time.

[Duzter]

More countries are into blockchain adoption. This is a forward move, but countries are specific in their stand of supporting blockchain technology and standing against cryptocurrency usage particularly bitcoin. China once a big supporter of Bitcoin is now supporting blockchain and in the plan of having their own cryptocurrency. Maybe this can take place with more countries, but there needs to be some common asset that unifies everything. This role probably taken by bitcoin.