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Digital currency vs Cryptocurrency, the What, the Progress and the Future - YouTube
Channel: Alvin Jing
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China aims to launch its digital currency
before the winter Olympics around the
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globe countries like England,
Canada, Sweden, Singapore,
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and the us are either researching. We're
piloting their own digital currency,
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but everyday we're already making
millions of payments digitally.
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So what makes this new digital currency?
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[Inaudible].
[29]
This is Calcutta, a beautiful
city in North Eastern India.
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If you'd like to pay a visit,
say from Toronto Canada,
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one of the things you need
to take care of is money.
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You can either change your
Canadian dollar into Rupee at home,
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or like most people buy some paper Rupee
when you land in the local airport,
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when your cash is about to run out, you
find an exchange shop and buy some more.
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You might find that inconvenient
to pack these paper, money,
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or looking for foreign exchange.
You're also probably worrying.
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Someone's going to steal it. Now, imagine
this you'll do your exchange at home.
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Then download an app called Indian
digital wallet. Then put your Rupee there.
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The digital wallet are accepted by all
merchants and people in India so that you
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don't need to carry
any paper cash anymore.
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You don't need internet
connection to make a payment.
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This is central bank digital
currency. Unlike the cash balance,
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your bank account central bank digital
currency doesn't require you to
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open up a bank account.
Central bank creates the money.
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They can even directly put
money into your digital wallet.
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These digital currency have the exact
same use of value as paper, money,
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except for they only
exist in digital form,
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meaning you can't go to the bank or
ATM and convert them to paper cash.
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Digital currency is not something
new. They already exist in many forms,
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mostly known as cryptocurrency,
such as Bitcoin, Ethereum,
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tether or XRP. But unlike
central bank, digital currency,
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these currencies are not issued
or managed by a central authority.
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Some of them operate under
the blockchain public ledger,
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some under its own network and protocol.
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Central bank digital currency on the
other hand are issued and backed by the
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country's central bank. Within a country,
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It can make sure everybody
accepted as a form of payment,
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but why all of a sudden in the past
three years central bank around the world
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started pinching the idea of digital
currencies. And more importantly,
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how are these so-called digital
currencies is going to impact us?
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An increasing number of people believe
cryptocurrencies like Bitcoin is the
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future of finance.
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Since there are only 21 million
Bitcoins to be mined in total.
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Bitcoin earned his name, the
digital gold. First of all,
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people don't love
cryptocurrencies for no reason.
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Using cryptocurrency like XRP,
moving money across the border.
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It can take as little as three seconds.
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Payments are quickly sent and received
in the local currency on either side of a
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transaction.
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There's no bank interference and
much lower fees making cross border
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transactions using Bitcoin.
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Unlike bank records your every transaction
Bitcoin transactions take place
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only between you and the receiver.
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Maybe the best feature
of the cryptocurrency is
that it makes cross-border
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transaction much faster with
no third party involved,
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thus much lower cost. But these
cryptocurrencies also have disadvantages.
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If buying coffee takes 10 minutes, it's
probably not a very pleasant experience.
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And that's how it feels when you shop
using Bitcoin. It's notoriously slow.
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Cryptocurrencies prices
are extremely volatile,
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which makes majority of the
merchants around the globe,
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don't take them as a form of payment.
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Most cryptocurrencies are
mainly used for trading,
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which was largely driven by speculation
rather than intrinsic values
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because the transactions are confidential
and no regulation is put in place.
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Bitcoin was used for gambling left
market trades and illegal payments each
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year, criminals laundered billions
of dollars using crypto exchanges.
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Despite its scarcity,
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Bitcoin is probably far from being the
gold in the world of digital currency.
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Along with cryptocurrencies, in 2019,
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Facebook announced his plan to launch
its own digital currency Libra.
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With billions of users.
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These tech giants could seriously
threaten the monetary sovereignty of the
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central bank.
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This makes central banks begin to
think about monetary alternatives.
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According to the bank of
international settlements in 2020,
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80% of the central banks around
the world are engaging some work in
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CDBC. Some country has already
launched the CDBC such as Brazil.
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Some countries are actively
piloting. For example,
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People's bank of China are aiming for
widespread domestic use of its digital
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currency DCEP by the
2022 winter Olympics in
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Beijing, some says it may be many more
years before they know what to do about.
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With most central banks actively
researching and piloting their new digital
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currencies. Now it becomes pretty
convincing that something new is coming,
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but is it going to bring a big
change in our lives. Domestically,
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not much really. In October, 2020,
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China gave millions of digital yearn
to citizens in Shenzhen for a taste,
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but some users say they prefer
existing shopping tools like Ali pay.
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With the day-to-day payment,
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paying using central bank digital wallet
or existing payment app like Wechat,
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pay or Alipay, doesn't really make
a difference. You download an app,
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scan QR code, shop as usual .
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Economists at PWC China says in order
to promote the digital currencies
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use ,Beijing may bundle it with subsidies,
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pension accounts or state sector
paycheques. If used domestically,
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you probably won't feel
much of a difference,
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but when you make cross border
transfers, CDBC might come in handy.
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Now it takes days when you're trying
to send money to friends or family in
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another country, not mentioning the
hefty transaction fee central bank,
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digital currency may take minutes
or even seconds at a lower cost.
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The exact technical details is yet to
be designed and maybe many years ahead,
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but it's good to have a better
alternative to transfer money using SWIFT,
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which is honestly ancient.
According to the world bank,
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over 22% of the adult around the
world have no bank account or
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payment service account.
More specifically in China,
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there are still 60 million people
who don't have a bank account.
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Government money goes through layers of
distribution to land into the hands of
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people.
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Some people don't even get the subsidies
because of corruption and mismanagement
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with city BC central bank is able to send
money directly to the people's digital
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wallets.
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And these CDBC can be used without
internet connection while CDBC can
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make cross border transfer much
faster and at a lower cost,
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just like cryptocurrency is not
without its own risks or concerns.
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Unlike Bitcoin CDBC in
nature is centralized.
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Any central bank controls the supply,
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some intends to use distributed
ledger technology like blockchain,
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which makes transactions anonymous and
traceable. Some don't use blockchain,
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which allows the central bank to
track every transaction. For example,
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China's CDBC.
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if every transaction you made with
the CDBC is on central banks book.
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The good part is they're able to analyze
consumer behavior to manage the economy
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better. They can detect
any illicit flows of funds,
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such as money laundering or
terrorist financing. For some of you,
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you may not want someone to monitor
what you're paying for all the time.
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For others,
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transaction data is already in banks'
book or third party service providers like
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visa or Wechat. So they
may be okay with it.
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Put that aside digital currency could
disrupt the current financial system.
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Your deposits are the commercial banks
are banks' major source of funding.
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Central bank. Digital currency could be
a direct competitor to commercial banks.
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When you convert your cash in
your bank account into CDBC,
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it causes commercial bank losing
their major source of funding,
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which may result in higher deposit
rate, Interest rate for loans.
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Moreover makes it difficult to provide
a credit needed to fuel the economy.
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All those central banks around the world
are actively researching and piloting
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their own digital currencies, the actual
design and implementation maybe years,
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and then making exactly how it will play
out. I guess we have to wait and see.
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