- China is currently the leading country in terms of a Central Bank Digital Currency (CDBC) development despite being hit hard by the COVID-19 pandemic during Q1 2020.
- The Eastern superpower has pioneered its own digital yuan in April through the Agricultural Bank of China with a pilot phase in four cities.
A recent publication on the Belfer Center for Science and International affairs, Harvard Kennedy School now says the move is a direct challenge to the United States to match up FinTech advancement from a monetary perspective.
According to the article, the U.S is still lacking behind given the ongoing progress in CBDC development within peer economies.
China Sets Pace for the U.S in CBDC Roll Out
The roll-out of China's digital yuan is no doubt a global pacesetter and will probably be a focal point of reference in digital monetary policy.
It is quite noteworthy that the development of the digital Yuan was hastened when Facebook announced Libra in 2019. Speculations are that the Chinese government was not about to take any chance should Libra have gotten the legal go-ahead.
While all this is happening in China, the U.S is still sorting stimulus checks and playing partisan politics in preparation for the 2020 elections.
The free world appears to have missed the point on this one, as debates continue both in the Senate and House of reps on the feasibility of digital currencies and the underlying blockchain tech. So far, none of these has come close to the development of a CBDC run by the FED.
However, some progress is being made in the private sector with crypto stakeholders opting for FinTech friendly states like Wyoming and California.
Crypto entities operating in these jurisdictions are also pushing for a concise regulatory framework that will enable them to make sufficient projections. With such hurdles, it is more difficult to catch up with China whose operations in crypto appear to be moving towards consolidation and proper oversight through the digital yuan.
CBDC Value Proposition in U.S Stimulus Checks
The $2 trillion stimuli, approved by the U.S Senate, has unearthed some shortcomings in the country's payments ecosystem. Despite its prominent status, the U.S government has had quite a challenge in distributing the funds to target beneficiaries.
Some of these shortcomings have been attributed to the country's unbanked population and lack of direct deposit arrangements with regulatory authorities like the IRS.
According to the Belfer Center publication, a digital dollar would have been instrumental for funds allocation during the COVID pandemic.
For starters, the government can track the stimulus check money trail to ascertain it is received as intended. In addition, the provision of a digital wallet would also be cheaper for both the government and U.S citizens in terms of account management.
Finally, a move towards a FED run CBDC, ensures that the U.S maintains its strategic footprint in the financial markets space.