In the past few months, Taiwan’s print media seem to have become engulfed in a “digital currency fever” — almost every day there are reports about digital currencies saying that central banks in many countries are rushing to research and issue them.
On Oct. 10 last year, the Chinese-language Economic Daily News reported that seven major national central banks, including the US Federal Reserve, had drafted principles for the issuance of central bank digital currencies (CBDC), in the hope of catching up with China.
The Liberty Times (the Taipei Times’ sister newspaper) in June last year reported that Taiwan’s central bank completed a study on “wholesale CBDC feasibility technology” for large interbank transactions.
Eighty percent of central banks around the world have initiated such research, and others are taking an increasingly positive view of CBDCs.
Why are Taiwan’s — rather than Japan’s or the US’ — financial media suddenly filled with reports about digital currencies?
China is a pioneer in advocating digital currencies. The People’s Bank of China began researching them in 2014 and founded research institutes in 2017.
In April last year, it announced that internal “digital renminbi” pilot tests would be conducted in Chinese cities including Shenzhen and Beijing, the venue of next year’s Winter Olympic Games.
China believes that when digital currency technology is mature, the digital renminbi would be used for borrowing and transactions under its Belt and Road Initiative so it can bypass the US dollar-based SWIFT system.
This shows that the Chinese central bank’s acceleration of digital currency development is intended to challenge the hegemony of the US dollar.
A digital currency researcher in Beijing has said that “future international competition may focus on the field of digital finance, and digital currency could be the ultimate battlefield.”
Broadly speaking, a digital currency is an electronically realized currency, such as transactions through mobile phones or tablets via the Internet. Third-party payments such as Google Pay, Apple Pay and online banking currencies can all be counted as digital currency.
The People’s Bank of China has said that “China needs to be the first country to issue a digital currency to promote the internationalization of the renminbi and to reduce its dependence on the US dollar payment system.”
However, the digital currency the statement referred to can only be called an improvement or a new payment system for the digitization of yuan payments. The currency is still the yuan, although it is not referred to as such.
A digital currency must inevitably be based on a mechanism for issuing currency that is trusted by banks, including central banks. There is no substantial difference between what China calls a digital currency and the internationally used US dollar. The only difference is the name and their relative values.
As China’s economy grows stronger, and the conflict between the yuan and the US dollar intensifies, the question for Taiwan is which side it should take.
Perhaps it would be more appropriate to call the People’s Bank of China’s digital currency a cash card issued by China’s central bank, as that digital currency is nothing more than propaganda from Beijing and a publicity stunt.
A “cashless society” is the ultimate goal of digital authoritarian regimes to control people’s thoughts and economic behavior. It is by no means a goal pursued by the free world.
Taiwanese do not need to dance to Beijing’s tune or act as its stooges.
Huang Tien-lin is a former advisory member of the National Security Council.
Translated by Lin Lee-kai
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