Always love working with my friends at “The Financial Brand!”
Here providing insight on CBDCs for two different articles
Richard Turrin, an American financial consultant and author based in Shanghai, and the author of 2021’s Cashless: China’s Digital Currency Revolution, has not been able to use the Chinese CBDB, called e-CNY, directly, but he’s observed friends using it in vending machines and elsewhere. He maintains that for China, already massively devoted to digital payments, eventual conversion to a digital currency “will be viewed as a footnote, rather than as a ‘Sputnik moment’.”
He says that this is difficult for Americans to understand because the U.S. payment system, and its usage, is so far behind China’s, where digital payments are the norm. In part this was accomplished by the elimination of such consumer-side charges as interchange fees.
“This allowed for a deeper level of societal digitization,” says Turrin, “meaning that everybody takes digital payments, from fairly large purchases to buying noodles from the smallest guy with a shop on the corner here.”
“It is true peer-to-peer direct payment,” says Turrin. He says that reports that the pilot will be expanded to a full rollout during the Winter Olympics in China in February 2022 are inaccurate.
“It will be trialed at the Olympics, for sure,” says Turrin. “It has always been planned to trial central bank digital currency at the Olympic area, and let foreigners use it.”
Instead of a major shift, Turrin expects China to get the e-CNY operational in its second- and third-tier towns, a gradual affair.
“There’s no advantage for the Peoples Bank of China to say, ‘OK, it’s our big day, everybody’s going to use it on Saturday.’ They’ll roll it out in city after city. It will gradually become the norm.”
Lurking behind all the technology of CBDC remains the key question of the role for the traditional banking system. Generally CBDCs are conceived as backed 100% by reserves, which doesn’t permit the volume of lending activity permitted by the fractional reserves policy of traditional banking. A point made in Richard Turrin’s Cashless: China’s Digital Currency Revolution is that CBDC designers and policy makers have to avoid creating a currency that winds up disintermediating banks.