Chinese central bank would like to replace cash with digital Yuan as soon as possible
The only miner of the planned Chinese digital currency: the People’s Bank of China (PBOC, Chinese Central Bank). Image of max12max via Wikipedia.de, license: creative commons
Cash is dirty and potentially contaminated with viruses. For China, this is a good reason to push the digital Yuan ahead, which is supposed to replace banknotes and coins. Behind it, however, the intention of giving the central bank more monetary policy instruments and being able to monitor financial flows better. The Chinese plans serve as a model for the EU.
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China is apparently not far from publishing an official digital currency. According to a report by the Global Times, the central bank, together with a number of private companies and banks.
The background is, as is currently the case with almost everything, the Corona crisis. She also questions cash. Migration sheets from hand to hand, and so they potentially also be a carrier of viruses who can get into the other hand over cash, and from there into their mouths. Central banks have already started around the world to put banknotes and coins in quarantine. In China, South Korea, the USA. In China, the central bank even went so far as to destroy banknotes and replaced with freshly printed. And even the Louvre in Paris, when it was still open, no longer accepted cash. The high law that cash is the only official and valid means of payment in the EU everywhere seems to contradict the protection against the Corona virus.
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The question of whether cash is actually a carrier of viruses is controversial. On the one hand, a spokesman for the World Health Organization said that banknotes are of course a carrier for bacteria and viruses and that it was therefore better to pay electronically from the point of view of health. However, the spokesman later emphasized that this comment is not related to Corona and should not be misunderstood as an official warning about cash. Coronaviruses can actually last on areas such as paper, if not days, and of course a infection is possible from there. According to virologists, however, this type of transmission plays a much lower role, if at all, the contact from person to person. No comparison if someone attaches you. As the main broadcast, cash is probably out.
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Negative interest with digital cash
Nevertheless, the Corona crisis gives the calls to the calls after the abolition of cash new tailwind. The demand to pull the notes and coins entirely out of circulation, because they are only used by criminals anyway, has been heard for a long time; Most of it, however, it remains only a radical position, while new anti-money laundering laws are so strictly regulated that it is becoming increasingly unsuitable for criminals. Therefore, the demand for the abolition of cash has lost steam in recent years.
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China is now planning to advance the digital currency that has long been announced for a long time to introduce it as quickly as possible in the slipstream of the Corona crisis. The hygienic measures are more of a icing on the cake. It is more important to the central bank that a digital currency can become a tool in the fight against the economic crisis. The Global Times explains that “the global virus outbreak caused the European Central Bank and the Japanese central bank to reduce its key interest rate to zero or even put it into a negative area.“Then the party -related Chinese newspaper Cao Yan, the general director of the Digital Renaissance Foundation: If the last option is necessary in China to make the key interest rates negative, a digital currency will be able to achieve this instead of the cash M0.
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Negative interest means that money shrinks. Instead of it grows by 1 or 3 percent a year, as before on the savings book, it becomes less about this percentage. The model here is the “miracle of Wörgl”: a small city in Austria has issued “shrinkage”, which lost one percent in value every month, and thus mastered the economic crisis of the 1930s. Of course, such a program will not encounter the consent of the broad mass of the savers. Therefore, the central banks fear that they discover their accounts to keep the cash themselves. Such a “bank run” could accelerate the impending collapse of the banks.
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Cash may be a thorn in the eye. But it plays an extremely important role for citizens: it is the corrective that allows it to be with the feet or. Seem to demonstrate against financial policy. If you want to alleviate a crisis with clearly negative interest rates, you have to start getting rid of the cash.
Private than bank transfers, but more transparent than cash
The central bank of China wants to introduce a digital yuan. Surprisingly, she also takes into account privacy and data protection. Because the digital Yuan should work in two tracks. Anyone who accepts and outputs smaller sums does not have to be personally identified. He can download the app and use it without a connection to a bank account, for example by paying it to someone else. Such a digital currency would be much private than the payment app connected to bank accounts. Only larger amounts-sums are not yet known-are said to be associated with know-your-customer measures and depend on bank accounts.
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This actually carries some of the ideological foundations of cryptocurrency into its digital currency: it works without a bank, users – possibly – its own keys, and privacy for the little man is not that bad. But of course the digital yuan will be centralized. It is operated by the central bank. And of course it is not its purpose to create privacy – but to enable surveillance.
According to an analyst from Beijing, the digital currency “gives” the central bank deeper insights into the transactions in the country “. Even if small amounts are not associated with identity, the transactions are transparent, which from the perspective of the survons is a significant progress towards cash. And that larger amounts can only be sent if identity is known, of course also the victory of the supervisors about the privacy. All in all, the central bank hopes to reveal the information through the digital Yuan, which is currently still putting in the dark through which cash is still in dark.
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China puts the West under pressure
China’s plans have already been experienced relatively far. The first plans for the digital currency go back to 2014. Since then, the central bank has worked with several tech companies and banks to develop a concept. One of the technical partners is Alipay, the financial arm of the Chinese Amazon Alibaba, whose payment app in China is one of the most popular means of payment. Alipay recently published five patents on the Chinese digital currency. These affect the core functionality of the currency, such as the circulation, payment, the surrender and inherent methods for preventing money laundering. An insider said the Global Times that the patent’s perspective is more or less complete.
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The next step will now be to create laws for the digital currency and to develop the concrete handling with banks, insurers and regulators. There are already partnerships with many banks, such as the Great China Merchant Bank. What should the banks do differently than to cooperate with the central bank?
Probably it will not be possible to release the digital currency during the immediate Corona crisis. But it could be that China is fast enough to get better under control with the digital yuan, the now unavoidable economic crisis. The western states – and other Asian countries – threaten to fall behind – after China has already given a better figure in the fight against the virus than western states such as Italy, Spain and the USA. If the country now cuts even better to relieve the economic crisis, this should again signal that the Chinese system of central planning and lack of freedom rights is the better answer to the challenges of 21. Century released.
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The EU is apparently aware of this situation. The European Central Bank also works on a digital currency and has managed to get the topic at least more attention in the course of the corona crisis. One of the elementary problems that the previous concepts deal with is the balance of privacy and the prevention of money laundering. So the digital euro should be private on the one hand, but on the other hand it should not be abused by criminals. Here, too, the solution apparently goes in a two -track direction: individual, anonymous tokens can be purchased to a certain amount, while strict identification is required for larger sums. Unlike China, however, the ECB should find it difficult to pull cash completely out of circulation and to prevent it that alternative digital currencies-be they published by countries such as China or the US. This could prevent the relevant effect that the Chinese central bank hopes for from its digital Yuan, or at least significantly delay the introduction.
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It has not yet been decided how specifically the digital currencies of the states will be designed. But it becomes increasingly clear that they come, and it also shows that every crisis of development gives a thrust. The cubes are like that, even if the rubicon is not yet crossed. For those who are interested in freedom of money and who would like the citizens to continue to have an instrument in the future to vote with their money against the monetary policy of the central bank – for those it has never been as precious as today that there are Bitcoin and other free cryptocurrencies.
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