Pál Pál Kolozsi added: digitalisation is advancing extremely fast in the financial world. The financial systems are undergoing a transformation,
in the world, state-controlled assets are starting to be pushed out of the markets. This has triggered thinking among central bank executives as this situation needs to be addressed.
There are various ways to do this, some with regulations, prohibitions, or they can be managed by issuing digital central bank money.
That is, central banks are also entering the “race track” by issuing digital money as a kind of central bank solution.
– He told. Digital central bank money already exists, but it is not available to the public. Ongoing projects are about making this more widely available. This could bring about a drastic transformation of the entire financial system. The digital central bank money development project has become a priority in many countries and has also emerged in Sino-US competition.
Digital central bank money may be able to protect countries’ monetary sovereignty by ensuring that digital cryptocurrencies, which can be seen as highly speculative instruments, do not destabilize or “dismantle” a country’s financial system.
Daniel Nagy, former director of the Moon Fund Management business and researcher, said: China is at the forefront of this, but not the first. Digital central bank money has already been introduced in the Bahamas. China, on the other hand, is the first of the largest economies to test the solution in four major cities. The target date is the Beijing Olympics, which will begin in a year’s time, by which time they plan to make China’s digital central bank money operational, which foreigners will be able to use, he said.
He called it possible that this event would accelerate “internationalization” projects. The development of the digital yuan began as early as 2014, to the best of their knowledge, it is money that can be used by the population in domestic circulation. According to him, so-called hybrid digital central bank money can be created, which will be used in a commercial banking network, the transactions can be seen by the Chinese central bank. Significant potential in this will be transactions between commercial banks, according to the researcher. The economic policy goals of the digital yuan included China’s state control over cash flows and its independence from the dollar system, which had begun since the 2008 crisis. Data protection and anonymity raise a number of other questions about the system, according to the expert.
The Director of the MNB recalled that global money usually originated from the status of the issuing country as a superpower, the dollar being such money. The situation of the Swiss franc is special because it is not a great power of the issuer. The dollar was also raised to the level of global money by a belief in its value stability. In the case of the yuan, there are also a number of negative factors related to the Chinese financial system that have prevented the Chinese currency from following this path so far, he said.
According to Daniel the Great, the weight of the yuan in global payments and central bank reserves remained around 2 percent, and it is impossible to break the dominance of the euro-dollar system “in the traditional way.” The crises – the 2008 or the current coronavirus crisis – have not been able to turn around, which would increase the weight of the yuan.
Digital central bank money can be a new, much cheaper solution in international trade, the current process of transfers is slow, taking place across multiple time zones and financial systems. Almost all of China’s main trading partners have begun to develop digital central bank money, citing Saudi Arabia as an example. From the weight of the dollar, these factors are slowly “biting out”. The development of digital central bank money is also in full swing in Europe, and there is research in the United States as well, he indicated.
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Source: Portfolio.hu – Bank by www.portfolio.hu.
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