Ex-PBoC Governor Says Digital Yuan Will Favor Local Markets

According to a statement made by Zhou Xiaochuan, an ex-PBoC (People’s Bank of China) governor and the current president of the Chinese Finance Association on the 27th of October Eurasia Forum conference, the digital Yuan will take a completely different approach to its integration within the Chinese economy compared to similar projects planned by the G7 countries.

To rephrase the announcement, the digital Yuan will mostly favor the local retail market in order to prevent the dollarisation of the Chinese economy. This is a highly political matter that China has been trying to deal with for decades now. The digital Yuan may be the solution for distancing itself as far away from the USD as possible.

Based on Xiaochuan’s comments, China mostly sees the G7’s digital currency plans as a measure against things such as Bitcoin, Libra, and similar products. The PBoC on the other hand is aiming at implementing digital finance into its economy alongside these projects in a way that could benefit the local economy. Currently, their best way of handling it is through the CBDC.

Agreeing on one thing

Even though China tries to seem a bit more open-minded about the digital economy, one thing they wholeheartedly agree with other G7 members is that a global stablecoin like Libra, cannot be allowed to launch without sufficient regulatory oversight by almost every single government body in the world.

The main argument here is that if there is a slight mismatch between regulations of this particular currency in the world, we could see tax havens, dark regulatory spots, and overall organization issues arise in several smaller countries. This is the case with regular currencies as well, many small nations provide massive tax breaks and lax regulatory oversight in exchange for investments and overall financial presence in the country.

Every G7 nation agrees that global coordination on the implementation of digital currencies needs to be agreed upon. The only exception would be the United Kingdom where the former governor of the Bank of England was quite supportive of Facebook’s Libra.

But one voice cannot outweigh the slew of opposition that has risen up towards the project. In fact, after so much regulatory scrutiny, very little can be heard of Libra in the first place. Even though the project is progressing, not too much is being documented on mainstream crypto channels.

Plans already underway

China has no time to sit around and wait until everything is ready for the digital economy. It has already launched a pilot project by providing Shenzhen, one of its tech hubs and port cities with 10 million Yuan’s worth of the CBDC. The circulation and the volume at which this currency is traded from hand to hand will be the determining factor of what needs to change about it or where it needs to be implemented in the future.

There is absolutely no doubt that China will be the first to launch such an extensive product in the world. But being the first doesn’t necessarily mean being the best. It’s completely possible that other G7 nations want to use the digital yuan launch as a study case for their own projects.

Image courtesy of FT