{"id":20875,"date":"2022-12-21T04:30:25","date_gmt":"2022-12-21T12:30:25","guid":{"rendered":"https:\/\/www.palada.net\/index.php\/2022\/12\/21\/news-14608\/"},"modified":"2022-12-21T04:30:25","modified_gmt":"2022-12-21T12:30:25","slug":"news-14608","status":"publish","type":"post","link":"http:\/\/www.palada.net\/index.php\/2022\/12\/21\/news-14608\/","title":{"rendered":"As China pushes its digital currency plans, the US falls behind"},"content":{"rendered":"

<\/p>\n

China\u2019s digital Yuan project, a blockchain-based cryptocurrency for consumer and commercial finance, can no longer be considered a pilot. That\u2019s the assessment by economic and cryptocurrency experts.<\/p>\n

Those experts have been monitoring efforts in China and other countries developing and piloting central bank digital currencies (CBDCs) with the aim of establishing a blockchain-based virtual cash that is cheaper to use and faster to exchange, both at home and across international borders.<\/p>\n

To date, the People\u2019s Bank of China has distributed the digital yuan, called e-CNY, to 15 of China\u2019s 23 provinces, and it has been used\u00a0in more than 360 million transactions<\/a>\u00a0totaling north of 100 billion yuan, or $13.9 billion. The country has literally given away millions of dollars<\/a> worth of digital yuan through lotteries, and its central bank has also participated in cross-border exchanges<\/a> with several nations.<\/p>\n

If e-CNY continues to be adopted and becomes the de facto standard for international commercial and retail payments, the privacy of those using digital currency<\/a>, as well as the US dollar\u2019s days as the world\u2019s reserve currency, could be at risk.<\/p>\n

Whatever nation figures out internationally accepted financial transaction network for digital cash will be the one to set the standards around it, “and then everyone else will have to follow them,” said Lou Steinberg, former Ameritrade CTO and managing partner at cybersecurity research firm CTM Insights<\/a>. “Those standards will be designed with what the developer of them wants to accomplish. Surveillance could be built in.\u00a0<\/p>\n

\u201cChina wants digital cash because it’s another tool to monitor citizen behavior \u2014 how much do you spend at the liquor store, do you go to the movies, and which ones?\u201d Steinberg continued. \u201cIf all transactions are recorded and tied to your account, they know a lot. A similar concern about government monitoring exists in the US, though the motives for monitoring may differ from an authoritarian state.\u201d<\/p>\n

The US has been considering creation of a digital representation of the dollar<\/a> for nearly three years. In March, President Joseph R. Biden Jr.\u00a0issued an executive order<\/a> that, among other things, called for more urgency on research and development of a US CBDC, \u201cshould issuance be deemed in the national interest.\u201d<\/p>\n

In November, the New York Federal Reserve Bank began developing\u00a0a wholesale CDBC prototype<\/a>. Named Project Cedar<\/a>, the CBDC program hammered out a blockchain-based framework expected to become a pilot in a multi-national payments or settlement system. The project, now entering phase 2, is a joint experiment with the Monetary Authority of Singapore to explore questions around the interoperability of the distributed ledger.<\/p>\n

“I don\u2019t think we\u2019re treating this like a Moonshot,” Steinberg said. “The Fed\u2019s not saying this is the future, like it or not, and we need to have a say in how it unfolds, and therefore it becomes the most important thing we do.”<\/p>\n

The blockchain technology that underpins digital cash projects is the same as that used for Bitcoin and Ethereum cryptocurrencies. The difference is that CBDCs, like traditional cash, are backed by a central bank\u2019s authority, which is why they\u2019re called central bank digital currencies.<\/p>\n

Distinct from online retail payments, such as those made via a mobile device, wholesale cross-border payments are transactions between central banks, private sector banks, and corporations. Cross-border spot trades (or immediate payments) are among the most common wholesale payments, as they are often required to support broader transactions, such as for international trade or foreign asset investment.<\/p>\n

While the US has made some advances toward creating a CBDC, it still lags far behind other nations.<\/p>\n

For example,\u00a0Project Dunbar<\/strong><\/a> brings together the Reserve Bank of Australia, Bank Negara Malaysia, Monetary Authority of Singapore, and South African Reserve Bank with the Bank for International Settlements (BIS)\u00a0Innovation Hub to test the use of CBDCs for international settlements.<\/p>\n

\u201cWe\u2019re looking at 13 current wholesale projects with different arrangements between countries,\u201d said Christian Catalini, the founder of the Cryptoeconomics Lab at the Massachusetts Institute of Technology (MIT). \u201cThe United States is clearly behind. Part of that is because there\u2019s not a consensus that a CBDC is needed or useful. There\u2019s only one clear nation leading the effort when it comes to both the scale of its experiment and its progress to date, and it is China.\u201d<\/p>\n

E-CNY is a digitized version of China\u2019s cash and coins and, like other CBDCs, it was deployed on a blockchain distributed ledger \u2014 an online, distributed database that tracks transactions. That database uses encryption to ensure online cash and coins exchanged through it are tamper-proof, meaning only users with access to specific private-public keys can participate in the transaction. In real terms, for retail that could look like a QR code on a smartphone being used to make a purchase in a store. Or it could be a corporation transmitting a public key code that allows for a specific monetary exchange.<\/p>\n

In 2020, the Atlantic Council<\/a>, a Washington DC-based think tank, began tracking 35 CBDC projects. Today, it\u2019s watching 114 CBDC projects globally, measuring their progress based on four stages: research, development, pilot, and launch. China\u2019s e-CNY currency has been in the pilot stage since 2020, when it announced the digital currency at the Beijing Olympics. (China has been exploring creating a digital currency since 2014.)<\/p>\n

The greener the regions, the more advanced the CBDC projects.<\/p>\n

\u201cOver a span of two years, the world\u2019s leading central banks have gone from skeptical to serious about a government form of digital currency,\u201d the Atlantic Council said\u00a0last month<\/a>.<\/p>\n

Ananya Kumar, assistant director of digital currencies at the\u00a0Atlantic Council\u2019s GeoEconomics Center<\/a>, said the Asian region in general and nations such as China, Thailand and the UAE, have the most advanced CBDC projects.<\/p>\n

For the US to actually develop and pilot its own retail CBDC \u2014 one that could be used by consumers \u2014 it would need congressional action that authorizes the Federal Reserve to move forward, \u201cand we\u2019re nowhere near that,\u201d Kumar said. \u00a0<\/p>\n

While China\u2019s e-CNY project may be out of pilot, the billion-plus yuan transferred using over its blockchain ledger isn\u2019t as monumental as it may seem.\u00a0Those transfers over the three-year life of the e-CNY rollout are only one-third of that transferred across Alibaba and Tencent Pay \u2014 China\u2019s two largest mobile payment processors \u2014 in a single day. \u201cSo, comparably, it\u2019s a very small number of transactions,\u201d Kumar said.<\/p>\n

While not yet a reality, in theory there is a threat to the US dollar because other nations developing their own CBDC networks could more easily transact without it. \u201cWe see this because there\u2019s been double the number of wholesale CBDC projects launched over the course of this year,\u201d Kumar said.<\/p>\n

\u201cSince the invasion of Ukraine, and sanctions packages unveiled against Russia, countries are trying to figure out what to do if that happens to them and how do they build a system against it,\u201d Kumar added.<\/p>\n

Financial rails, or clearance and settlement systems such as SWIFT in place today, honor sanctions imposed by NATO nations. But as CBDCs become more widely adopted, nations such as Russia, North Korea, or China could ignore those sanctions by using digital currencies<\/a> not regulated by the US or its allies.<\/p>\n

http:\/\/www.computerworld.com\/category\/security\/index.rss<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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\n
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China\u2019s digital Yuan project, a blockchain-based cryptocurrency for consumer and commercial finance, can no longer be considered a pilot. That\u2019s the assessment by economic and cryptocurrency experts.<\/p>\n

Those experts have been monitoring efforts in China and other countries developing and piloting central bank digital currencies (CBDCs) with the aim of establishing a blockchain-based virtual cash that is cheaper to use and faster to exchange, both at home and across international borders.<\/p>\n

To date, the People\u2019s Bank of China has distributed the digital yuan, called e-CNY, to 15 of China\u2019s 23 provinces, and it has been used\u00a0in more than 360 million transactions<\/a>\u00a0totaling north of 100 billion yuan, or $13.9 billion. The country has literally given away millions of dollars<\/a> worth of digital yuan through lotteries, and its central bank has also participated in cross-border exchanges<\/a> with several nations.<\/p>\n

To read this article in full, please click here<\/a><\/p>\n<\/section>\n<\/article>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"colormag_page_container_layout":"default_layout","colormag_page_sidebar_layout":"default_layout","footnotes":""},"categories":[11062,10643],"tags":[21359,11067,10554,714,24580],"class_list":["post-20875","post","type-post","status-publish","format-standard","hentry","category-computerworld","category-independent","tag-financial-services-industry","tag-government-it","tag-mobile","tag-security","tag-small-and-medium-business"],"_links":{"self":[{"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/posts\/20875","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/comments?post=20875"}],"version-history":[{"count":0,"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/posts\/20875\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/media?parent=20875"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/categories?post=20875"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.palada.net\/index.php\/wp-json\/wp\/v2\/tags?post=20875"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}