Intense interest in cryptocurrencies and the Covid-19 pandemic sparked the debate among central banks over whether to issue digital currencies.
China has been the leader in developing its own digital currency. It has been working on the initiative since 2014. Chinese central bank officials have already conducted major trials in major cities, including Shenzhen, Chengdu and Hangzhou.
“China’s experiment is very large,” said J. Christopher Giancarlo, former chairman of the U.S. Commodity Forward Trading Commission. “When the world arrives in Beijing next winter for the Winter Olympics, they will use the new digital renminbi to shop and stay in hotels and buy meals in restaurants. The world will see a functioning. [central bank digital currency] soon within the coming year. ‘
The US is playing catch up. At the end of February 2021, Fed Chairman Jerome Powell said the US would engage with the public this year about the digital dollar.
Advocates claim that central bank digital currencies can facilitate cross-border transactions, promote financial inclusion and provide stability to the payment system. There are also privacy and surveillance risks with digital currency being issued by the government. And in times of economic uncertainty, people may be more likely to withdraw their funds from commercial banks, accelerating a banking contest.
Watch the video above to find out how central bank’s digital currencies can become the future of world finance.