China has spent five years preparing to launch the digital yuan, which might happen in a matter of months. But bankers and financial industry professionals surveyed at an industry conference in October still believe the United States will be the first to create a global digital currency.
Attendees at the ACAMS anti-money laundering (AML) and financial crime conference were asked by blockchain intelligence firm Chainalysis who they thought would be the first to launch a stablecoin-like digital currency intended to be used beyond one country’s borders.
The top answer was the U.S., with more than 37% saying it was most likely to launch the first worldwide digital currency in the next five to 10 years.
This “makes sense considering that the U.S. dollar is the world reserve currency,” Chainalysis noted in a November 6 blog post.
Nearly 30% said the world’s first virtual currency would not be launched by a government at all. Instead, they said a decentralized currency was most likely to be first out of the gate.
China came third, with about 21% of the vote. This despite the fact that it is clearly far ahead in the race to launch a viable—sorry, Venezuela—central bank digital currency.
As for Facebook, its Libra proposal may have forced the conversation from regulators’ offices into the legislative halls of power, but faith in the stablecoin is apparently fading in the financial community. Just 5.8% of the 350 financial industry professionals surveyed believe it will come first. That puts the newly launched Libra Association in a tie with Switzerland.
“Our belief in the potential of cryptocurrency was echoed by the number of finance professionals who… envision a global digital currency in the near future,” said Jonathan Levin, co-founder and chief strategy officer of Chainalysis, in a statement.
China yuan-ts control
Whether a digital yuan can make the jump from a national currency to a global one is an open question. But it’s one China would seem likely to try. For one thing, it would fit in with the country’s massive “belt and road” initiative, which is investing billion in infrastructure projects in the developing world. These are more about projecting power and influence than about a return on investment.
For another, the country’s powerful president, Xi Jinping, just declared blockchain technology a national priority. And while unofficial government spokespersons made clear that Xi wasn’t talking about Bitcoin, a government planning body quietly killed a proposal to ban cryptocurrency mining on November 6, according to The Block.
But mostly, a representative of the country’s central bank came very close to flat out saying that a global currency is the Digital Currency Electronic Payment (DCEP) project’s goal at a Hong Kong conference on November 6, according to Reuters.
The country is taking “a horse race approach” to its digital currency development, which will reportedly rely heavily on blockchain, said Mu Changchun, head of the People’s Bank of China’s (PBoC) digital currency research institute.
“The front runner will take the whole market,” Mu said. “[W]ho is more efficient, who can provide a better service to the public—they can survive in the future.”
He also confirmed reports that the digital yuan will be distributed to major banks and other institutions—such as tech giants like Alibaba (which runs digital payment system Alipay) and Tencent (WePay). The digital currency will then distribute them to users.
Mu also reiterated the regime’s opposition to Facebook’s Libra stablecoin, calling it “a threat to the country’s currency sovereignty.” He added that all stablecoins would have to abide by China’s foreign exchange rules.
No private stablecoins
Libra is getting the cold shoulder from all directions, as was made clear when Facebook CEO Mark Zuckerberg was dragged over the coals (mostly by Democrats) at six-hour hearing of the U.S. House Financial Services Committee on October 23.
Then, on November 4, the International Organization of Securities Commissions (IOSCO) said that stablecoins—particularly global ones— “can include features that are typical of regulated securities.” This would mean following disclosure and registration rules that would be as deadly to stablecoins as being regulated by the Securities and Exchange Commission has proved to cryptocurrencies in the U.S.
But it is in Europe where the strongest opposition is growing. A draft text of a European Union proposal published on November 6 calls for finance ministers follow a G20 recommendation and forbid global stablecoins until regulations are in place. Without explicitly mentioning Libra, the draft also calls for banning projects that are seen as a threat to the financial system.