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Richard Turin on China’s Official Digital Currency

Q1: Richard, why not start by sharing the outlook for FinTech in China?
Answer:
> Most people in China don’t use cash and instead use a payment platform
> People have become cashless in China even before the People’s Bank of China (PBOC) announced a digital currency for testing. Q2: How long has China experimented with digital currencies? What does a digital currency look like in a pilot project?
Answer:
> Work to build a central bank digital currency started in 2014
> Digital currency trial started in late August 2020
> Shenzhen City first used Central Bank Digital Currency (CBDC)
> Even in 2022, most local retailers will not accept (trial) digital currencies in Shanghai
> About 250 million people have downloaded the app in 12 trial cities Q3: If you understand correctly, CBBC is basically a payment wallet for now.

Answer:
> Central bank digital currencies are designed on the basis of Alipay and WeChat platforms
> Alipay and WeChat make payments using a QR code and the money is stored in your bank or WeChat account
> For central bank digital currencies, money is stored digitally on the phone

Q4: One of the similarities between China and India is the existence of these fintech companies, which are actually quite large. So how did the CBDC affect Alipay and WeChat? Did they lose?
Answer:
> Low volume of transactions performed during Central Bank Digital Currency (CBDC) trials
> So far, CBDC has no impact on Alipay and WeChat
> In the future, the system will affect Alipay and WeChat, but they will co-exist in the payment ecosystem
> People can choose a payment platform just like they choose a credit card over others
> When people receive salaries in digital currency, usage increases
> CBDC, Alipay, WeChat, etc. are symbiotic in nature and will make digital payments bigger in China Q5: Where does crypto fit all of these?
Answer:
> Cryptocurrencies are banned in China
> Cryptography coexists with fiat currencies in India and other countries
> It will be a breakthrough if India builds a digital currency that can be transferred from one phone without a network (like NFC) to another.
> Central bank digital currencies help India’s financial inclusion
> Mobile technology that enables offline payments brings tremendous benefits to local people
> Central bank digital currencies offer stability, unlike cryptocurrency volatility Q6: As you know, everyone is discussing that cryptocurrencies themselves may not exist for some time. Blockchain technology has the potential to form part of the digital currency. Is it a Chinese experience? Is the blockchain somewhere in the architecture?
Answer:
> Blockchain is not suitable for large countries that require high throughput and high speed payment systems
> The standard western credit card network operates with 50,000-70,000 transactions per second
> On a large shopping day in China, the Alipay network exceeds 5,000,000 transactions per second
> High-speed blockchain protocols exist, but are not “bulletproof” for central banks to build now Q7: China is toying with the idea of ​​banning individual QR codes. Why is this?
Answer:
> China has banned personal QR codes used for commerce
> The concept is as follows: If you run a business, do not use your personal QR code for business purposes. Q8: If you can zoom out a little, what does the CBDC experiment in China mean for the economy? International trade?
Answer:
> Alipay and WeChat do a good job of paying for coffee
> China’s digital currency is about further digitization of payments in society, such as payments for salaries and business expenses. Q9: What do you mean when you say they aren’t designed to go?
Answer:
> China’s Alipay and WeChat are not designed for businesses to pay employees
> Another example of the use of central bank digital currencies is the Dalian Commodity Exchange in China.

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