RICHARD TURRIN: It would be crazy to get rid of your money entirely. Cash plays a key role, for example during natural disasters, when there are electricity problems. The ability to use non-cash payments, central bank digital currency (CBDC – Central Bank Digital Currency, legal tender issued in digital form by state central banks) as one of the payment options, does not exclude the maintenance and use of cash in the financial system. China is an excellent example of a country leaning towards this philosophy. Despite progress towards becoming a cashless country, no one in China is talking about taking cash out of circulation.
China has overtaken the United States a decade in the development of central bank digital currency (CBDC). Why did this happen?
China started working on the CBDC in 2014, and the United States only in 2021. The development of payment platforms stems from the Chinese central bank’s decision to allow big tech companies, Alibaba and Tencent, to enter in the payment area. China decided to use this solution because traditional banks were no longer able to build new branches, especially in rural areas. The launch of Alipay and WeChat Pay came at the expense of public banks. A bold and costly decision for banks that is hardly expected from Western central banks or the US Federal Reserve.
What is the working mechanism of digital currency?
The CBDC is not a government-controlled list of names and purchases. However, many people, especially related to cryptocurrencies, try to scare the CBDC system. They claim that the government will control the money.
And it won’t be like that?
No, that’s complete nonsense. The CBDC, as the name suggests, is issued and backed by a central bank. One digital euro will be worth one euro. Nothing will change. The value of the digital euro will be stable, unlike the price of Bitcoin, which is currently losing money.
CBDC is not a cryptocurrency, but uses similar technologies.
Therefore, it is indebted to cryptocurrencies, however, digital currency is controlled by the government, so many cryptocurrency supporters do not approve of it. As society becomes increasingly digital, it needs digital money. The CBDC is a natural element in the evolution of means of payment. Digital money is safe and easy to use.
One of the main charges against the CBDC is that the government will spy on our purchases.
The CBDC guarantees confidentiality. Publications from the European Central Bank show that the euro’s digital security standard will be superior to the credit card security standard that we have been using for a long time.
In “Cash’s End”, you write that “a totally explosive mix of fintech, finance and government policy is about to explode in China and change our world forever”. What lack of cash will affect our daily life?
Cashless living is very convenient. You can pay for everything, even the most expensive things, using this method. You can make transfers at any time and for free.
Will we pay for all goods and services by phone and QR codes?
It’s possible. In Google Pay and Apple Pay, you can pay for the purchase using NFC technology. The solution works, but it’s more expensive than paying with a QR code, because you have to rent or buy a special device at the point of sale. To pay with a QR code, just print it on a sheet of paper. No need to spend money on any device. This is one of the reasons why QR codes have been so quickly adopted in China.