From Japan to the European Union, countries with different economic circumstances are stepping up their pursuit of digital currency\u2014both for geopolitical reasons like catching up with China, and to make it easier to enforce controversial policies such as negative interest rates.<\/p>\n
This increased pace of development has led to the sharing of resources, with banks and organizations pooling research, and in the case of the World Economic Forum, even issuing a toolkit to help authorities deploy their own digital currencies.<\/p>\n
A possible catalyst for the rapid development of the digital yuan was last year\u2019s announcement of Facebook’s Libra, which appeared to prompt the People’s Bank of China (PBoC) to speed up development on concerns that Zuckerburg’s digital currency could hamper the project.<\/p>\n
But while Libra crashed against a wall of regulators in October, the digital yuan has continued to push ahead.<\/p>\n
The first pilots of the new currency took place in Shenzhen and Suzhou at the end of 2019, and saw the Digital Currency Electronic Payment (DC\/EP) system put through its paces in real-world applications, \u201csuch as transportation, education, and medical treatment," according to local financial news outlet Caijing<\/a>.<\/p>\n Though the results weren’t made public, a statement <\/a>from the PBoC in early January said the trials had gone well and that development of the government-backed digital currency was \u201cprogressing smoothly.\u201d<\/p>\n As of yet, however, no timelines have been issued for the official rollout, leaving other world powers unsettled as they anticipate the possible consequences of the Chinese Communist Party (CCP) dominating this emerging financial technology.<\/p>\n For Washington, the digital yuan threatens to shift the balance of global financial power away from the dollar, thus reducing the ability of the U.S. to enforce economic sanctions on adversaries. This was brought to the attention of global leaders last week as they assembled in the alpine town of Davos at the annual meeting of the World Economic Forum.<\/p>\n The discussion covered a hypothetical situation, as previously explored in a crisis simulation<\/a> at Harvard, where the digital yuan was employed by China’s trade partner North Korea to bypass global sanctions and fund the development of a long-range missile that could reach U.S. shores. Speaking to the gravity of the situation, simulation leader Neha Narula said the simulation "made it clear that this (development of digital yuan) is a national security concern.\u201d<\/p>\n Though the U.S. has been behind the curve with state-backed digital currency, development efforts are now being made by former CFTC chair Chris Giancarlo\u2014also known as ‘crypto dad’\u2014who delivered his first public speech devoted to a digital dollar at Davos. He explained to listeners how his digital dollar foundation plans to beat out U.S. rivals like China with a regulated platform for trading greenbacks on the blockchain.<\/p>\n At the same event, blockchain experts from the World Economic Forum took the opportunity to issue a \u201cCBDC Policy\u2011Maker Toolkit<\/a>" that is intended to help countries research and deploy CBDCs.<\/p>\n This might come in useful to Japan, one of the most cash-based societies on earth, which has recently pivoted in pursuit of a sovereign digital currency. A group of Japanese lawmakers said last week they would be working to create a state-issued digital currency in response to Facebook\u2018s Libra and China\u2019s digital yuan: \u201cChina is moving toward issuing digital yuan, so we\u2019d like to propose measures to counter such attempts,\u201d said parliamentary vice-minister for foreign affairs Norihiro Nakayama<\/a> on Thursday.<\/p>\n With the World Economic Forum on side, Banks in Europe are also emboldened. The Bank of England<\/a> has announced that it is pooling research with the Bank of Japan, the European Central Bank (ECB), the Swedish Riksbank, the Bank of Canada, the Swiss National Bank and the Bank for International Settlements (BIS), to investigate the effect of CBDCs on financial stability and monetary policy.<\/p>\n"A national security concern"<\/strong><\/h2>\n