China’s Bank Notes Quarantine, A Case for Digital Currency
The growing impact of the coronavirus has brought to fore what could be a considerably clear usecase for Chinese digital currency as China battles a deadly outbreak. At a press conference on Saturday Feb. 15, the deputy governor of the People’s Bank of China, Fan Yifei, confirmed that the outbreak which has restricted millions of Chinese people to their homes and towns, is taking them a notch higher by compelling authorities to quarantine old bank notes.
According to a Bloomberg report, the move is to ensure money from key virus-hit areas are sanitized with ultraviolet rays and locked up for at least 14 days before it is distributed again. The government cut off the transfer and allocation of old bank notes across provinces, and between cities most affected by the deadly outbreak as well as ramped up measures to sanitize old money to reduce contagion risks and added 600 billion yuan ($85.9 billion) of new cash.
With a digital currency, the fear of further transmission of the virus through the everyday use of bank notes as well as the effort being put in place for the cleansing process and the resources to be expended on achieving the result would have been unnecessary – or at least minimal. Most, if not all transactions, would have been conducted electronically through devices and may not have required the physical exchange with human contacts.
Nonetheless, as the coronavirus continues to wreak havoc, there has neither been any official mention of the progress level on the issuance of the much-awaited digital currency nor a clue as to whether its release would be expedited. It’s killed more than 1500 people, and related death have been reported outside Asia.
The outbreak will likely tell on the projected growth of digital payment in Asia. A recentMcKinsey estimate puts Asia as likely to represent approximately three-quarters of the global total of personal financial assets as incomes continue to rise and the middle class grows to include two-thirds of Asian households accounting for a total of $69 tln by 2025. With digital payments in China accounting for approximately 99% of the country’s non-cash transaction volume and 45% of digital payments worldwide, the McKinsey paper summarizes the current status of Asia’s banking industry and outlines a possible plan of action for banks: reinvent themselves for the digital age.
Some of the banks are already partnering with fintech start-ups to promote digital payments across Asia as they have not only “caught up and begun to surpass their Western peers in scale” but looking into “consumers’ tech-savviness has created opportunities for banks to deliver new innovations and leap ahead” with the likes of Asia’s best-known fintech innovators Alipay and WeChat Pay leading the world in scaling digital payments.
Hopefully and in the long term, the outbreak’s effect would be less felt by Chinese tech giants Baidu and Alibaba Group which are also projected to be major innovators in coming years following a Nikkei study which concludes that China will reign supreme in nine categories over the next ten years. After analyzing patent application data in 10 categories, including blockchain and artificial intelligence, China scored the highest in 2017 leading in nine categories and accounting for 49% of all applications in all 10 categories that year.