China has become the world leader in the development of the digital currency issued by the central bank, or CBDC, fuelling speculation about the country’s domestic and international ambitions for its CBDC.
Speaking to Cointelegraph, Glenn Woo, head of the Ledger Vault in the Asia-Pacific region, predicted that China’s state-backed virtual currency will be the first to be launched worldwide.
Woo emphasized the speed with which the Chinese government can deploy major initiatives on a national scale, suggesting that early trials of its CBDC with 19 businesses, including Starbucks and McDonalds, can grow quickly to encompass a much larger pilot. He said:
„I believe that when it arrives, it will be one of the first real CBDCs, not the first, with a real world use case.“
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„No one will even know the difference.“Many analysts have postulated that China is seeking to regain control over domestic payments through its CBDC, and Woo estimates that more than 96% of small retail transactions are processed by AliPay or WeChat Pay.
However, Woo offers a more nuanced explanation, stating that the growth of digital payment platforms was allowed by China’s central government and aligned with many objectives of the regime, centralizing the vast majority of the country’s financial activity in a handful of financial platforms, including rural areas previously beyond the reach of the government.
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Woo predicts that the CBDC will be integrated into existing digital payment tracks, causing little disruption to Chinese economic activity while offering the government greater control and knowledge of the country’s retail economy:
„From the retail user’s perspective, [you] wouldn’t necessarily know what had changed, it’s going to be the same,“ Woo said. „They’ll still use WeChat, the super application, to do many different things: shopping, calling taxis, transferring money, you know, handing out red packages during the holidays, and so on.
„It’s going to be perfect, no one’s going to know the difference,“ he added.
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Internationally, Woo predicts that China will use its Corona Millionaire as a means to boost trade settlement in Chinese currency.
Woo predicts that China will seek to encourage its trading partners to make a deal using its CBDC, saying the government will seek to strengthen the use of its CBDC for international trade, especially with nations that depend on Chinese imports.
However, Woo doubts that such a strategy will be very successful in the short term, and points to growing protectionism worldwide in the midst of the economic recession.