Richard Turrin on China's official digital currency

Q1: Richard, why don’t you start off by sharing what does China’s fintech landscape looks like?
Ans:
>Most people in China don’t use cash, instead they use payment platforms
>People went cashless in China even before the People’s Bank of China (PBOC) launched its digital currency for trials
 
 
Q2: How long has China been experimenting with the digital currency, and what does the digital currency looks like in the pilot project?  
Ans:
>Works to build the central bank digital currency started in 2014   
>Trials for the digital currency started in late-August of 2020
>Shenzhen city first used the central bank digital currency (CBDC)
>Even in 2022, most local retailers don’t accept the (under-trial) digital currency in Shanghai
>Around 250 million people have downloaded the app in 12 trial cities
 
 
Q3: If I have understood you correctly, right now the CBBC, what it looks like, is essentially a payments wallet.  
Ans:
>The central bank digital currency is design off Alipay and WeChat platforms
> Alipay and WeChat use QR codes to make payments, where the money is stored in a bank or WeChat account
>In case of central bank digital currency, the money is stored digitally on the phone 
 
 

Q4: One similarity between China and India is the existence of these fintech firms that have actually become quite big? So, what has been the impact of the CBDC on Alipay and WeChat? Have they lost out?
Ans:
>Amount of transaction carried out during the trial of central bank digital currency (CBDC) is low
>No impact of CBDC on Alipay and WeChat for now
>In the future, the system will impact Alipay and WeChat. But they will coexist in the payment ecosystem 
>People will have the choice of payment platforms, like choosing a credit card over other
>Usage will increase if people get salaries in digital currencies
>CBDC, Alipay, WeChat etc are going to be symbiotic in nature and will make digital payments big in China
 

Q5: Where does crypto fit in all of these? 
Ans:
>Cryptocurrencies are banned in China
>Cryptos will coexist with fiat currencies in India and other countries
>If India builds a digital currency that can be transferred from one phone to another without a network (like NFC), it will be ground breaker    
>A central bank digital currency will be helpful in financial inclusion in India  
>Mobile technologies that allow offline payment offer tremendous benefits to rural population
>Central bank digital currencies offer stability, unlike the volatility of cryptocurrencies
 
 
Q6: You know, everybody is talking about how crypto itself might not be around for a while. Blockchain technology could form a part of digital currency. Is that the experience of China? Does Blockchain figure anywhere in the architecture?
Ans:
>Blockchain is unsuitable for big countries that need payment systems with high throughput and speed
>Standard credit card network in the West operate between 50,000 to 70,000 transactions per second
>During big shopping days in China, Alipay network exceeds 5,00,000 transactions per second
>Fast Blockchain protocols exists, but none of them are ‘bullet-proof’ for a central bank to build on now
 
 
Q7: China has toyed with the idea of banning personal QR Codes. Why is this?
Ans:
>China banned personal QR codes that were used for business transactions
>The concept is: If you are running a business, don’t use your personal QR code for business purposes
 
 
Q8: If we can zoom out a little, what does China’s experiment with CBDC mean for its economy? And what does it mean for global trade?
Ans:
>Alipay and WeChat is doing a good job about making a payment for coffee
>China’s digital currency is about further digitisation of payments in the society, like paying salaries, business expenses etc 
 
 
Q9: What do you mean when you say that they were not designed to go?
Ans:
>Chinas’s Alipay and WeChat are not designed for companies to make salary payments to employees
>Another use case of central bank digital currency is at the Dalian Commodity Exchange of China