Chinese Digital Currency: A Domino Effect In The Making

Blockchain, News, Opinion | November 8, 2019 By:

The Chinese digital currency is gearing up to be the first of its kind, and most of the countries are slowly but surely starting to see it as a serious problem.

The idea of the CBDC (Chinese Bank Digital Currency) was to somehow combat Facebook’s Libra, which is why President Xi Jinping started to promote and popularize the idea of blockchain. This was done in order to “get the population in the mood” for the upcoming digital currency.

What the Chinese authorities may not have considered is that they could be causing a domino effect with such a decision.

Having an economy as large as China to create a digital currency that would be much more useful for global trade is a serious issue for the United States. Why? Because the USD would immediately lose its dominant features.

These days, fewer and fewer people are starting to rely on cash as their main medium of exchange. A lot of banks have started to popularize their card payments or digital payments services, thus taking cash out of the equation as much as possible.

Once this digital economy is fully popularized, it will be absolutely essential that banks are able to process large sums of money as fast as possible, and with the current system that is simply impossible.

Libra is an issue abroad as well

Libra is not only an issue in China, but it’s also a serious issue in pretty much the whole world. Well, at least the governments of these countries paint it as an issue and try to regulate it as much as possible.

Nowadays, the introduction of a state-run digital currency has appeared as a perfect counter to Facebook’s aspirations.

Many a government, including the European Union, have concluded that adding a native digital currency has the potential of rendering Libra completely obsolete. Even though Facebook would have access to 2 billion users through its platform, the governments would still manage to outperform it on a national basis.

But let’s not forget the title of the article. If China had not gone ahead with its decision to implement the national digital currency, very few nations would even be considering to add such an asset to their economies.

In a sense, if crypto adoption does speed up in 2020, we will have China to thank for it.

The countries and jurisdictions who have at least considered creating a digital currency are The United States, The European Union, Hong Kong, China, Iran and various other island nations that are currently reliant on the USD or any other currency that is not theirs.

Will this usher in a new era for cryptos

Many crypto enthusiasts believe that state digital currencies are going to popularize cryptos in general. This is very unlikely to happen on a direct approach. What this means is that the states are not going to tie their digital currencies to the crypto market, thus keep it on a separate system.

However, the fact that digital currencies will require the blockchain technology cannot be denied. And what is a currency on blockchain but a cryptocurrency?

It’s very likely that if not the prices of cryptos, but the knowledge and popularity could increase among the populations of countries that adopt their own state digital money.