Notes on a digital currency plan, made in China

Context: China’s recent launch of Central Bank Digital Currency (CBDC) though finch innovation has started an era of future money.

Advantages of CBDC:

• Compliance and National Security: It acts as an antidote for tax evasion, money laundering and terror financing .
• Low cost handling charges: As compared to paper currency where it could range from 1% to 2% of GDP. Cross borer payment should then be frictionless.
• Financial Inclusion: Money can be transferred easily through Direct Benefit Transfer to the remotest corner of the country.
• Powerful Insights: On purchasing patterns of the citizens and regulating the demand and supple accordingly. 
• Tackling Monopolies: China accounts for nearly 90% of trading volumes and hosting 2/3rd of bitcoin mining operation. CBDC is thus launched to curb and tackle these unregulated markets.
• Two Tier Structure: The design of Digital Currency Electronic Payments (DCEP) includes two their mechanism where central bank would involve financial intermediaries such as commercial banks. This will preserve the power of existing financial systems. 

Disadvantages 

• Surveillance state: CBDC can be used to spy over every movement of money. This leads to erosion of citizens privacy.
• Technical Complexities: Possibility of software bugs and hacking increases the risks.
• Dark Web: Illegal activities are sponsored through the use of digital currencies.

China’s Signal to the World:

• Challenging US’s hegemony: by replacing the U.S dollar and default global reserve currency.
• Checking Multinational Enterprises: including companies like Facebook with its digital currency Libra. China internally also may try to tackle Alipay and WeChatPay that controls 90% of digital payments.