CBDC - international competition intensifies

Central bank digital currency access for small and medium banks is on the agenda, international competition intensifies
 "The digital yuan has reached initial results and is currently undergoing internal closed tests." On September 24, Central Bank Vice Governor Fan Yifei's remarks generated a lot of attention and discussion. They also talked about the access of small and medium banks to the digital yuan.
Recently, the Central Bank's Digital Currency Research Institute and City Bank Clearing Services Co. Ltd held a ceremony of signing a strategic cooperation agreement. The two sides will carry out strategic cooperation on digital yuan projects to provide city commercial banks, private banks and other small and medium-sized financial institutions with single access services to the digital yuan interconnection platform.
At the next stage, both sides will discuss their proposals to accelerate the implementation of cooperation projects and maintain the digital yuan ecosystem to improve the quality, efficiency of financial services and promote the integrated development of the digital economy.
Since the establishment of the Central Bank's Digital Currency Research Institute in 2016, the research and development on digital currencies of the Central Bank of China has continued for 5 years. Since last year, officials have stated that the digital currency is “ready to be issued” and also explained the mechanism for its development. The central bank's digital currency is gradually revealing its secret; this year it has been piloted in Shenzhen, Suzhou, Xiong'an New District and Chengdu. In late August, the central bank digital currency wallet registration channel was briefly open to the public. In addition, in addition to the usual use cases such as transfer and payment, the digital yuan has also begun testing the entry-level "credit card redemption" scenario. This shows that the digital currency of the central bank is gradually taking on a life.
Zou Chuanwei, chief economist at Wanxiang Blockchain, said that looking to the future, the digital yuan still faces the following challenges. Firstly, it is the quality of customer service and their acceptability, can it really be used, secondly, the security and efficiency of the digital yuan system, can it support 1.4 billion Chinese, and thirdly, can the digital yuan fully leverage its natural and convenient cross-border payment characteristics.
“The digital currency of the People's Bank of China will serve as a prelude to global digital currency competition. The focus is on who can better tackle the challenges of cross-border payments, settlements and remittances, ”said Huang Zhuo, deputy director of the Digital Finance Research Center at Peking University recently.
Under the influence of this, most countries have realized the importance of central bank digital currencies.
Amid rapid progress, the Central Bank of The Bahamas recently announced that it will “gradually roll out” the consumer-oriented digital currency, the Sand Dollar, starting October 20. In the first phase, private sector participants such as banks and credit cooperatives will prepare their systems with “KYC” and other compliance checks for small, personal and corporate wallets. The second phase, scheduled from early 2021 to mid-2021, will focus on preparing the necessary infrastructure services for government and private sector CBDCs (e.g. utility companies). The Central Bank of The Bahamas said that more and more financial and payment institutions have begun investing in creating mobile wallets for users and are preparing to launch related services.
The United States has also accelerated the study of CBDC digital currencies. Recently it was revealed that the Federal Reserve is studying digital currencies along with several regional federal reserve banks. The Boston Federal Reserve Bank is working with the Massachusetts Institute of Technology to experiment with technologies that can be used in the CBDC. However, it should be clear that such an experiment is an important part of assessing the benefits and costs of a central bank digital currency (CBDC), but that does not mean that the Federal Reserve will decide to adopt this currency.
Japan is more radical in this regard. This year, Japan has changed its attitude towards "resistance" and is gradually introducing a central bank digital currency. In September, the headquarters of the Liberal Democratic Party on Strategy for Establishing a New International Order prepared a "report" aimed at organizing a discussion of the country's economic security strategy. Demanding the promulgation of the Industrial Data Applications Promotion Act to the rest of the world and working with countries in Europe and America to introduce and distribute the Bank's Digital Currency Center (CBDC) as soon as possible.

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