The People’s Bank of China’s New Digital Currency
by Jon Wood
Big data – what does it mean and how can it affect us? No one really knows yet, as we’re still very much exploring its potential, particularly in the Fintech space.
Interestingly enough, I came across a great article one or two days ago and it has really opened my eyes to the benefits of using Big Data in banking and currency.
The Bank of China has decided to introduce a new digital currency for all to use. I will admit that I am not that clued up when it comes to digital currencies. I have obviously familiarised myself with blockchain technology, and Bitcoin, for example. however, this is solely for the China and it actually sounds pretty cool. Let me explain…
China is seriously exploring the technical, logistical, and economic challenges involved in deploying digital money. It won’t be easy as how do you suddenly convert millions of people to a digital currency when some parts of China don’t even have conventional banking available? Think about the infrastructure as well, how would business and consumers react?
Nevertheless, we are living in a digital world and this is something that other nations should be thinking about. Yes, it will have broad implications for the economy as it will affect the way we trade and buy goods. You can only imagine for now what it would be like to have only digital spending power – will you miss good old paper? I would.
However, there are some positives we can take from this.
A single flat digital currency backed by a bank would, in theory, have the same legal status as a banknote, now that means that financial transactions would be A. more secure. B. traceable, C. cheaper, which is great but the best bit is it also it means that everyone would have access to this joint digital currency.
Again, just to reiterate, this would mean financial services become more widely available. Now this takes me back to the beginning for a second, blockchain technology is designed to counteract fraud and in general a safe way of recording large and small transactions but this is taking blockchain to a whole new level.
One small hiccup though and it’s only small if you agree that we live in an open digital world where we do get snooped on, as our privacy is becoming less and less important these days. A digital currency would give any government a greater ability to oversee all digital transactions, meaning corruption and fraudulent behaviour could be easily monitored. Surely that’s a good thing, but our finances have always been a private matter, so it could take a bit of getting used to.
I won’t disagree that this is the way forward and at the end of the day we have to wake up and realise that the digital age has already revolutionised our lives, but we just don’t think about it as we are used to it.
My final point is regarding the economy and economic insights. As everything is digital and automatically recorded, a digital currency would, in theory, offer real-time insights into retail spending, and spending in general. That means greater understanding of consumer needs and desires, meaning our lives as consumers (in all the many forms that comes) can be streamlined and facilitated to an unimaginably precise degree. It could be really liberating.