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The Capital

The post-pandemic world is looking towards digital currency — Money that the virus cannot touch

By The Crypto Basic on The Capital

The COVID-19 pandemic is changing the world as we know it. People work from home and are increasingly connected to the digital world.

Such changes are also detrimental to the global economy, and in unprecedented circumstances, unprecedented measures must be considered to prevent the world from plunging into a large and inevitable recession.

One such area that is considered by the second-largest economy in the world is the sovereign digital currency.

This way of financial relief fits well with China, a country that has already invested massively in fintech or financial technology.

In 2018, over 60 percent of people in China used smartphones, which means that they are already connected to a type of fintech that is offered today in the form of mobile payment applications such as WeChat and Alipay.

China is already used to scanning a QR code or clicking a button to pay for almost everything instead of using cash.

Why not take the next step from converting banknotes to a fully digital currency?

This was the main question asked by Fudan University’s Charles Chang, who led the CGTN Think Tank’s second online course on China’s economic recovery during the COVID-19 pandemic.

The course started with a lecture in which Chang gave an overview of how China had explored the potential of its digital currency, the Central Bank Digital Currency (CBDC), as an alternative or replacement for the physical thing.

The reasons for this are simple: a digital currency (one that is directly controlled by the central bank) would be easier to track and control than physical currency.

To demonstrate its usefulness, Chang made some statistics. With the use of digital currency, Chang said that 30 percent of GDP emissions could grow by 3 percent over the long term due to the reduction in inefficient transactions, largely thanks to the traceability of the currency.

State digital currencies can not only be tracked, but they can also be regulated and monitored more effectively than normal currencies.

According to Chang, this would allow full enforcement of the rules for a digital currency, e.g Restrictions on gaming spending or the use of currency for speculation on the stock markets.

Regulatory measures for that currency could also be used to benefit people in general. Unlike the 2008 financial crisis, the economic downturn amid the coronavirus pandemic is affecting the real economy, with countries like the United States reporting 22 million jobs in one month.

CBDC could be programmed to avoid the costs of speculation and stock purchases and could benefit taxpayers with restrictions on other reckless expenses.

The last part of the course was devoted to a live question and answer session, followed by questions from social media users.

During the discussion, it was generally agreed that CBDC was a good idea, especially during the time of an unprecedented pandemic, as noted by Mark Sleboda, a Moscow-based international relations analyst.

Sleboda noted that the pandemic would be a watershed moment for financial technology, primarily due to the expectation of what he called a V-shaped economic recovery, which would in fact be in waves due to the unpredictable nature of COVID-19.

Therefore, a solution like CBDC is urgently needed as a whole new method to fix the global economy when traditional solutions don’t work. Guest Edgar Pérez, a financial expert, added to the discussion that with 2.5 million people worldwide without access to a traditional bank account, the digital currency would be a means for them to join access to money and the ability to spend.

However, Sleboda cautioned that the digital currency features a double-edged sword. With huge damage on the horizon for the global economy due to the pandemic, there would be winners and losers in fintech.

While businesses and essential services are likely to be able to get help, anything in the start-up phase, without enough funding or adequate capital to stay afloat, would likely fail.

Both guests agreed that the ability of the digital currency to be monitored and controlled was a good thing in a pandemic time, and therefore, major economies like South Korea and the United States, whose democratic presidential candidates were considering the move.

With China at the forefront of the digital currency trend, Sleboda and Pérez generally agreed that the Chinese yuan will be more competitive on the global stage. A revealing change for the global economy as new changes in finance are gearing up to shape a post-pandemic world.

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