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“We certainly expect China’s digital currency to ramp up as we get closer to the Beijing Olympics.”

“Separate from the Digital RMB, cryptocurrencies are a challenge to central banks all over the world. One reason why central banks are pursuing central currency makes them fear that they could lose monetary sovereignty over their economies. These are connected.”

“We in the west like to look at these advancements in China and think it threatens the dollar, but I think the west misunderstands the domestic implications for monetary and fiscal policy.”

“One of the issues in the West, is they say specifically that they are worried about privacy, security, and protecting users. It is a different situation in China in how it is being developed in China.”

“Overtime, as belt and road debt gets denominated into yuan, you could see it overtime being part of the internationalization of the RMB. However, I don’t see this as the ambition or most likely potential outcome for the digital Yuan.”

“In almost every country we look at that is creating a central bank digital currency, almost all of them are going through commercial banks. The federal reserve does not want to have 330 million customers, and wants to deal with all of the administrative quarrels. It is not competing with the banks, but actually working in cooperation with them.”

“Most countries are asking for the creation of wallets so they can have some sort of verification mechanism within them.”

“Western holdups with regards to digital currency generally has to do with privacy. People might be comfortable in the US that PayPal knows what they’re doing, but not with the federal reserve knowing. China is working on this, the offline communication and offline payment part is very interesting to the general public, because security measures go into securing those payments”

“The first way this could go is that China continues to have successful tests of its pilot, the PBOC can rapidly scale this up, and then this becomes a big player within China along with the other ways people use financial systems within China. Other systems will continue to develop. The inflection point is when cross-border exchanges happen. Will it come first from China, or other countries? The game changer for the world is not countries creating their own digital currencies, but the ability for it to be sent instantly overseas. If this happens, you will see a change in the way the exchange rate market works, potentially make the SWIFT system obsolete, and could cause a lot of disruption. However, we are not technologically there yet because each country is trying to figure out how to do it for themselves.”

“If the PBOC (People’s Bank of China) wanted, and had the capability, it could completely dominate the digital payment market. The state is able to do much more with money than the private sector can do, but I am not sure if that is what the state once. They do not want to wipe out their financial systems in the process of making this change.”

“There are conversations that go on about digital currencies between working groups, and central banks. However, there is a hesitancy in the west of including China in these conversations. There are security fears. The political issues sometimes gets in the way of what could be a useful technological exchange, however we do need to be careful in this early exchange about how much is being shared. I do think the G20 is an appropriate forum to have this conversation, but there is not much conversation taking place between the U.S. and China.”

“Will the U.S. government allow American athletes to use the Chinese digital yuan? What restrictions will foreigners have with spending in China? I think these issues will be covered in the press in the coming months.”

“Most countries haven’t explored how foreigners can use their digital currency. Lots of countries will look to China on how they handle it. However, it is not the priority of central banks to solve how tourists can use it, or how it can be used overseas.”

“You only need to look at the U.S. to see why governments would be more interested into getting money in people’s hands immediately. With digital dollars, it could completely transform the way we give stimulus, distribute food stamps, and pay taxes. Prior to the pandemic, it wasn’t on government’s minds that they needed this in their arsenal. In China’s case, it is not that they want to displace the banks, and other financial institutions and mechanisms, but it is something they want in their arsenal.”

“I would agree with professor Cheng, I am an optimist as well. Where there is peril, there is more promise. The Chinese created cash, and then the British created checks, and so on and so forth. This is the next evolution of money. It is not only a China or US story, but it is a global story. 80 countries around the world will dictate what they need, say what they want, and the global financial system will change based on all of their actions.”

Quotes from Lian CHENG