Central Bank Digital Currencies (CBDCs) should have a set of rules applicable globally to deal with highly sensitive issues like information sharing and monitoring. This is according to a new proposal put forward by Mu Changchun, the director-general of China’s central bank, the People’s Bank of China (PBOC).
Speaking during a Bank for International Settlements seminar, Changchun said interoperability between different CBDCS should exist for as many jurisdictions and exchanges around the world.
“Information flow and fund flows should be synchronized so as to facilitate regulators to monitor the transactions for compliance.”
The Rise of Digital Currencies Call For International Corporation
Digital currencies led by Bitcoin have gained more traction in the corporate world, increasing the need for fundamentals like sufficient regulation, infrastructure, and custom-designed products.
Changchun added that the global rule should feature a fair supply of central bank-issued digital currencies to ensure that the international monetary system evolves in a healthy and stable way.
“A digital currency supplied by one central bank should not impede another central bank’[s ability to carry out its mandate for monetary financial stability.”
China’s PBOC is likely to become the first Central Bank to issue a digital currency. So far, it is the leading country in CBDC development and testing, an initiative that has been active since 2014.
By March 4, 2021, China reported that it had given away millions in digital Yuan (referred to as the Digital Currency Electronic Payment DCEP) as part of its real-world trial phase.
The government also said in a separate statement that it plans to fasten its pilot programs for the digital Yuan, to increase consumption and consequently boost its economic recovery and growth.
China’s CBDC Agenda
The digital currency is expected to reduce the usage and the amount of cash in circulation as well as offering steep competition to popular payment networks in China like Alipay and WeChat Pay.
However, unlike many other countries’ CBDC attempts which allow for the concept of financial freedom embedded in DeFi, China’s CBDC features a high level of centralization.
The BBC reported in September 2020, that the DCEP will one day become a global digital currency due to the huge population of Chinese people inside and outside of China. Therefore, the DCEP would be an effective tool for the Chinese government to replace the dollar as the world’s reserve currency and further propagate its communist agenda.