In other words, should the Chinese government take a hardline stance on forcing commerce to be done in the new CBDC, given their significant economic clout, USD hegemony could be dealt a hefty blow. In the report’s view, the first major CBDC to market will also have a decisive advantage over even the Googles, Amazons, Facebooks, Apples and Microsofts of today. While the politically embattled libra could be huge, for example, it lacks regulatory approval and is weakened considerably by this.
As China (and India) develop electronic, crypto, and peer-to-peer strategies, the epicentre of global economic power could shift. China is working on a digital currency backed by its central bank that could be used as a soft- or hard-power tool. In fact, if companies doing business in China are forced to adopt a digital yuan, it will certainly erode the dollar’s primacy in the global financial market.
“China is gaining a decisive advantage over financial applications that use DLT”, the report details. “This will likely disrupt the GAFAMs, which have prospered with the help of the personal data of customers. Whoever dominates a blockchain will control the trust of users on that platform. Whoever dominates the first major state digital currency will control the banking and e-commerce sector within that nation (at least).”
The report makes clear that USD still dominates global trade by leaps and bounds, but affirms, “The Chinese government has made tremendous efforts to internationalise the renminbi, similar to the US intervention in the early twentieth century. From 2000 to 2015, the RMB share as a settlement currency in China’s trade has increased from zero to 25 percent.”
Government Good, Regs Necessary
Sadly for the cryptocurrency enthusiasts clicking on the Deutsche Bank report in hopes of seeing Satoshi’s vision for a peer-to-peer electronic cash system affirmed, the publication mostly praises central banks, heavy regulations, and operates under a bizarre assumption that state actors themselves aren’t subject to similar corruption as other markets. Not to mention an overall theme dismissive of concerns about privacy.
The report details:
Specifically, private cryptocurrencies significantly increase the risk of financial crime (e.g. AML, KYC, bribery, sanctions, and tax evasion). We expect that technological solutions and regulation will evolve to sufficiently address this concern.
“Our twentieth-century payment system needs to be upgraded and digitised. Governments, particularly those in Western countries need to wake up before it is too late”, the group declares. “That is because a private, loosely regulated digital currency is probably not the best response to the coming financial disruption … Cryptocurrencies must become legitimate in the eyes of governments and regulators.”