Today at the virtual World Economic Forum, leading Chinese economist Zhu Min, said he didn’t think there’s a plan for the digital yuan to expand the currency’s international reach through the Belt and Road Initiative, responding to a question from Coindesk’s Michael Casey.
Zhu Min is Chairman of China’s National Institute of Financial Research at Tsinghua University and a former Deputy Managing Director at the IMF and former Deputy Governor at the People’s Bank of China.
He also said, “I don’t think we thought of it (digital yuan) as an instrument to compete with the dollar. And currency competition is a very vague and unclear concept both in economic theory and also in practice.”
However, Zhu Min believes that the central bank digital currency (CBDC) will be used across borders, driven by market forces. These include trade flows, cross border payments, and currency exchange.
The importance of respecting the integrity of other countries was raised.
“Is Singapore willing to have the Chinese digital currency move into Singapore? And China willing to accept the Singapore digital currency? Maybe the two countries can sign a deal?” asked Zhu Min jocularly.
He also touched on interoperability and highlighted that two CBDCs could have very different technical designs.
On the same panel, Singapore Senior Minister Tharman Shanmugaratnam talked about the current risks of dollarization for some emerging economies and digital currencies will exacerbate those risks. So there is the issue of monetary sovereignty.
He spoke about the need for publicly provided digital identities, like India’s Aadhaar. That’s important not just for domestic digital currencies but also for cross border transactions where he envisions the identity also being used.
“Internationally that tool will remain important: agreeing amongst regulators on the principles and requirements to ensure that you don’t have anonymity. And that you do have traceability of transactions in a world where, let’s face it, illicit activity will remain a fact of life for a long time to come,” said Shanmugaratnam.
One of his biggest concerns with digital currencies is cyber risks. “It’s a huge issue,” he said. “And one of the reasons why I myself favor this biodiversity. And favor not having one big dominant central bank digital currency solution even within our own countries, let alone internationally.”
“You don’t want the whole system blowing up at once,” he said.