Digital Yuan Shows CBDC A Distant Cousin of Bitcoin
China’s central bank digital currency (CBDC) push is merely bringing to life what could be considered an extension of what cryptocurrencies could achieve, a fintech and China expert has suggested.
Richard Turrin, author of ‘Innovation Lab Excellence’ and ‘Cashless’, a book on China’s digital currency revolution, argues in a recent interview that both crypto and CBDC are going to co-exist especially as the concept of paying an intermediary to move money – like credit cards – doesn’t make sense anymore.
Over $40 million worth of the digital yuan has been reported distributed by China thus far since the trial phase of the digital currency started in major cities. As the world’s most advanced digital currency initiative, China’s quest to maintain a single unit of currency – albeit in a digital form – is also perceived to be a reason for the Chinese government’s heightened clampdown on crypto-related activities within its borders.
Turrin thinks it is imperative to clear the misinformation particularly in the crypto community about what China’s digital yuan is all about, saying that they are of different spectrums.
“They are in opposition to one another. But these are different spectrums of the digital currency universe,” he said, talking about CBDC in theory being the same as the paper money in a user’s pocket as issued by a central bank hence the apex bank’s liability.
It differs from crypto which represents a broad term that suggests a people-led movement for money that is backed by faith and belief of what its value should be as opposed to the value central banks attach to it.
“By the way, upfront for everybody, it’s not one or the other, I believe they are both going to get along peaceably in the long term.”
Crypto deserves credit for CBDC
Meanwhile, regardless of the fact that CBDCs are not designed to run on blockchain as is the case with China’s digital currency, they still share some things in common with crypto. Turrin said:
“What we really need to be thinking about – and this is really true – is that every CBDC is really a distant cousin of Bitcoin and cryptocurrency. Cryptocurrency was first. Let’s make no qualms about it. And when we look at the technology of China’s CBDC, it borrows a lot from the crypto world. Thanks to all the crypto fans out there, crypto is changing our world. For those who say ‘I really hate cryptocurrency’, fine, go to CBDC.
“…the two sides of this coin – the crypto guys and the CBDC guys – sometimes they hate each other so much that the CBDC guys don’t want to give credit to the crypto people for the great work they did in showing us how digital currency can function. The crypto guys hate CBDC so much that they disown it. They really get mad at it. I’m neutral. I think they are both going to co-exist.”
The real promise of crypto is to make money movement be immediate and free as email, the author said, adding that those in the crypto space had the “vision of an immediate direct digital payment without a third party intermediary being paid or taking a margin or fee on that transmission.”
“That’s really huge and when it came to China, there was an explosion,” he notes, stressing that the digital financial inclusion of many in China in recent years gave the country’s GDP a boost.