Digital money is coming

A digital "note" worth 200 yuans. Photo Costfoto / Future Publishing via Getty Images

A digital euro will be worth one euro. Nothing is going to change. The digital euro value shall be stable, unlike the price of Bitcoin which is now sustaining huge losses – says Richard Turin, the author of “Cashless. China’s Digital Currency Revolution”.

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Getting rid of cash completely would be madness. Cash plays a key role during natural disasters for instance, when there is shortage of electric energy. A possibility to make cashless payments, to employ a Central Bank Digital Currency (CBDC – legal tender, issued in a digital form by state central banks) as the sole payment option should not preclude the retention and use of cash within the financial system. China is a perfect example of a country that inclines to this philosophy. Despite its progress towards a cashless state nobody in China is talking about withdrawing cash from circulation.

China outranked the US by a decade in terms of CBDC development. Why did it happen?

China started working on its CBDC in 2014 and the US – only in 2021. The development of payment platforms resulted from the China’s central bank’s decision of letting the big-tech companies Alibaba and Tencent enter the payment sphere. China resolved to use this solution because traditional banks had no possibility opening new branches, particularly in rural areas. Running Alipay And WeChat Pay took place to the detriment of state banks. Which was a bold and costly decision for the banks, one that is hardly to be expected from Western central banks or the Fed.

What is the mechanism of digital currencies?

CBDCs are not name or purchase lists controlled by the government. However, many people, especially those associated with crypto-currencies, are trying to scare others with the CBDC system. The claim the government will supervise money.

Will it not be so?

That is utter nonsense. A CBDC, as the name itself suggests, is issued and supported by a central bank. A digital euro will be worth one euro. Nothing is going to change. The digital euro value shall be stable, unlike the price of Bitcoin which is now sustaining huge losses.

CBDCs are no crypto-currencies but they use some similar technologies.

That’s why they owe crypto-currencies a debt of gratitude; however, digital money is state-controlled therefore many crypto-currency supporters do not approve of it. The society is becoming ever more digital so it needs digital money. The CBDC system is a natural link in the evolution of legal tender. Digital money is safe and convenient.

One of the main arguments against CBDC is that the government will spy on our purchases.

CBDC assures privacy. A European Central Bank publication suggests that the security standard of the digital euro will be higher than that of the credit cards we have been long using.

In “Cashless. China’s Digital Currency Revolution” you wrote that a fully explosive mixture of financial technologies, finance and government policy would soon explode in China, thus changing our world forever. How will “cashlessness” influence our everyday life?

Cashless life is very convenient. With the use of this method you can pay for everything, including more expensive things. You can transfer money at any time and without commission.

Shall we be paying with QR codes and phones for everything?

That’s possible. At Google Pay and Apple Pay one can make a purchase using the NFC technology. The solution works but is more costly than a QR code payment because a special device must be delivered to the vending point. In order to pay with a QR code it is well enough to print in on a sheet of paper. There is no need to spend money on any device. It’s one of the reasons why QR codes were so quickly adapted in China.

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Interviewed by Tomasz Plaskota

Translated by Tomasz Krzyżanowski