Late yesterday the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology released results of their combined research into Central Bank Digital Currencies (CBDCs). At the same time it became public knowledge that the Chinese app for its own Digital Yuan was now available on both the Apple and Android app stores.
As the Chinese government doesn’t need to consult with its citizens in any way regarding how the Digital Yuan operates or what data it collects, the implementation of a CBDC is much simplified. As was shown in the earlier paper from the Boston Fed (Money and Payments: The U.S. Dollar in the Age of Digital Transformation), the Fed evaluated the implications of a CBDC in America, which will generate significant public discourse regarding the overall structure of the U.S. banking system and privacy. Obviously these discussions will involve politics, so it’s likely going to take a long time to resolve:
“In development since 2014, the Digital Yuan wallet has undergone extensive field testing across the country, with the pilot run handling transactions worth $5.34 billion as of June 2021. The central bank states that the CBDC had been used for over 70 million payments across more than 1.3 million scenario.
The wallet app has so far been available on an invitation-only basis, but its arrival on the app stores signals the central bank’s determination to seed the technology across the population ahead of the showcase Winter Olympic games in Shanghai next month when it will compete for traction against the dominant commercial payment apps from Ant Group and Tencent.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group