PwC explains how digital currency could transform the global financial landscape.
Pingyao, in Shanxi province, was once the financial centre of Imperial China—the birthplace of banks that led the world in remittances and settlements using “tickets” that were sort of a tokenized legal tender. The People’s Bank of China honoured Pingyao, now a UNESCO World Heritage Site, in 2019, with a set of silver and gold commemorative coins. Even as it honours the past, though, China is focused squarely on the financial future. In 2020, the country began testing a digital renminbi (RMB), which could have revolutionary implications for the future of money. Although a virtual RMB probably hasn’t blipped on many CEO radar screens, particularly given the disruptive effects of the pandemic, it’s time to start tracking how the financial environment could shift.
China started with several urban pilots of the digital RMB—known formally as digital currency electronic payments (DCEP)—and is studying moves to broaden the trial to additional areas. DCEP is a fully digital version of the RMB, downloaded using authorized apps (digital wallets). The currency may incorporate secure technologies such as blockchain, as well as near-field communication (NFC) capabilities that allow offline money transfers when two wallets (typically mobile devices) touch.
Since 2009, when bitcoin arrived, a variety of cryptocurrencies has arisen, launched first by start-ups (like Ethereum), but more recently by established players such as Facebook, whose Diem partnership looks to create a new global digital ecosystem. The People’s Bank of China is likely to be a pioneer in the launch of a digital fiat currency, potentially ushering in a new era in the digital economy.
For CEOs and their top teams worldwide, the rapid changes in the virtual currency landscape should prompt questions about their readiness to operate and seize opportunities in the new environment. For example:
- Have we thought through the implications for supply chains when more transactions in some regions are denominated in digital currency?
- How could we better serve our customers by reducing friction in digital currency transactions?
- How up-to-speed are we on the new regulatory frameworks that monetary, securities and tax authorities are beginning to build out?
If you’re not wrestling with questions like these now, it’s time to start.
By Wilson Chow & Vicki Huff Eckert
About the authors: Wilson Chows leads PwC’s global technology, media & telecommunications (TMT) practice. Based in Hong Kong, he is a partner with PwC China. Vicki Huff Eckert is the West Region vice chair of PwC US and PwC’s global leader of new ventures and innovation. Based in San Jose, California, she is a partner with PwC US.
Read the full article at https://www.pwc.com/gx/en/issues/reinventing-the-future/take-on-tomorrow/china-future-money.html