The adoption of blockchain technology by a variety of sectors and institutions is further along than most people would realise and we’re finally starting to see the real case uses come to the fore.
Blockchain has been a key word in any conversation around the next step of technological development across industries. In some spheres this has become more of an exercise in creative marketing, but under the hood of some of the most important institutions, the technology is really powering the development of future systems.
The global financial system has also had a keen eye on the possibilities of blockchain technology and central banks are now racing ahead in various projects to digitize their nation’s currencies.
Global superpowers China and America are at different stages of their individual exploration of Central Bank Digital Currencies (CBDC). Nevertheless their respective projects have proven that CBDCs are closer to reality than they’ve ever been.
CBDCs are on the horizon
Surprising to some but not to others, China has edged out ahead in the race to developing a fully working and widely used CBDC
China has been actively developing its digital currency electronic payment (DC/EP) over the past 18 months and is now expediting the testing of the pilot project across some major metropolitan areas and major financial institutions.
What is perhaps most telling is the sheer scale in which the DC/EP is being tested across China. It’s been almost two weeks since the ‘Digital Yuan’ was rolled out to major cities like Beijing, Tianjin, Hebei as well as Hong Kong.
The DC/EP is also being tested by a number of China’s biggest banks, while major companies in the transport and mobile payments sectors are also beginning to expose users to the new digital currency.
In July China’s ride-sharing giants Didi Chuxing signed a deal with the People’s Bank of China’s to test the digital Yuan. Considering that the service provider has over 550 million users, a massive amount of people will be introduced to the DC/EP through the platform.
China’s major banks and mobile payments forerunners WeChat Pay and AliPay will be major role players in the distribution and management of the Digital Yuan.
America following suit
As China blaze the proverbial trail for Central Bank Digital Currencies, their socio-political rivals America are seemingly behind in the race to develop government-run digital currencies.
Nevertheless the US Federal Reserve has revealed that it has been working alongside the Massachusetts Institute of Technology to develop and test a hypothetical digital currency intended for the use by central banks.
The US effort promises to make the codebase for the project available to the public for open source use and collaboration.
It must be said that Federal Reserve governor Lael Brainard made it clear that the America Federal Reserve has been exploring the CBDC space for the past few years. While China’s progress has been far more publicised, America’s efforts have to factor in a number of regulatory concerns.
Perhaps most interestingly, Brainard believes that the development of CBDCs could benefit the global economy at large and is encouraging Central Banks to collaborate going forward.
“We are participating in the CBDC coalition of central banks. While each country will make decisions on whether to issue and how to design a CBDC based on its own domestic legal framework and financial and economic context, we benefit from collaboration on CBDC research.”
Whether we will see America and China working hand-in-hand on this front remains to be seen. However it is safe to say that Central Bank Digital Currencies are on the horizon and are only getting closer to becoming a reality.