Countries are lining up to walk down the aisle with blockchain-based currencies. And the world’s second-largest economy is leading the way with the People’s Bank of China (PBoC) accelerating efforts to launch a digital currency that would allow the government to maintain control of its money supply while appealing to the pro-mobile, pro-digital, instant-delivery ethos of everyday modern apps.
China is reportedly shifting into high gear following President Xi Jinping’s recent pledge to be the world’s blockchain champion.
He is also responding to the threat of tech giants that are moving fast to offer instant, mobile and digital payment solutions as well as banking services that can outperform traditional financial institutions.
Although government-backed digital currencies are not decentralized cryptocurrencies, Bitcoin bull Mike Novogratz, founder and CEO of Galaxy Digital, believes China’s latest endorsement of the very technology that underpins Bitcoin and millions of crypto transactions, triggered BTC’s recent bounce from the $7,500 level to over $10,000. With Bitcoin now trading around $9,257 at time of publishing, according to CoinMarketCap, and with blockchain gaining strong support from China, the computer science behind cryptocurrencies is becoming harder and harder to dismiss as a fad.
Speaking in New York on Tuesday at the Reuters Global Investment Outlook 2020 Summit, Novogratz said that President Xi’s endorsement of blockchain technology “just credentialized crypto and blockchain,” reports Cointelegraph.
Countries are on the move.
On Wednesday, Ukraine’s Ministry of Digital Transformation signed a memorandum of understanding (MoU) with leading global crypto exchange Binance to offer guidance on regulations and to introduce cryptocurrencies into the marketplace.
According to the agreement,
“Binance will also help develop transparent and effective mechanisms for the transfer of rights to any virtual assets or currencies using blockchain technology as well as beneficial conditions for investments and business in Ukraine.
As part of the cooperation agreement, the Ministry of Digital Transformation of Ukraine and Binance will set up a working group to develop a strategy for the implementation of blockchain technology and the creation of the new virtual assets and virtual currencies market in Ukraine.”
Meanwhile, during the first quarter of 2020, Hong Kong and Thailand will reportedly release new research on their joint digital currency project, reveals local news source EJ Insight. Dubbed “Project LionRock”, the initiative is exploring the application of central bank digital currencies (CBDCs) for cross-border payments and payments among banks in Hong Kong and Thailand.
Norway’s central bank, Norges Bank (NB), is considering the issuance of digital currency “to ensure the existence of suitable legal tender as a supplement to cash.”
According to the International Monetary Fund (IMF), “a battle is raging for your wallet” with incumbents having to swat away tech-savvy newcomers.
“Adoption of new forms of money will depend on their attractiveness as a store of value and means of payment.”
Rather than directly competing against tech giants, the IMF speculates that a new type of marriage may be the way forward, with central banks holding hands with the private sector “to offer the digital cash of tomorrow – called synthetic central bank digital currency (sCBDC).”
“This synthetic central bank digital currency – or ‘sCBDC’ for short – offers significant advantages over its full-fledged cousin [the CBDC], which requires getting involved in many of the steps of the payments chain. This can be costly – and risky – for central banks, as it would push them into unfamiliar territory of brand management, app development, technology selection, and customer interaction.
In the sCBDC model, which is a public-private partnership, central banks would focus on their core function: providing trust and efficiency. The private sector, as providers of stablecoins, would be left to satisfy the remaining steps under appropriate supervision and oversight, and to do what they do best: innovate and interact with customers.”
Several countries, including Sweden, where cash transactions are losing ground, are exploring the issuance of a central bank digital currency as a smart hedge against paper money that could rapidly start looking, feeling and smelling like the new vinyl record or VHS tape. As cash-based payments continue to dwindle in certain countries, regulators and bankers are investigating how to supplement fiat with a digital clone.
The IMF report suggests that stablecoin cryptocurrencies are well-suited for the task.
“Payments are more than the mere act of transferring money. They are a fundamentally social experience linking people. Stablecoins offer the potential for better integration into our digital lives and are designed by firms that thrive on user-centric design. Large technology firms with enormous global user bases offer a ready-made network over which new payment services can quickly spread.”