Cryptocurrencies and the future of international economic relations

Pingyao County, Shaanxi Province was once the financial center of ancient China and the birthplace of private banks in the past. For the future of international economic relations, these private banks led the world in remittances and settlements using “drafts,” a symbolic legal tender. In 2019, the People’s Bank of China issued a set of gold and silver commemorative coins to celebrate the inclusion of the ancient city of Pingyao on the UNESCO World Heritage List. China has always been proud of its past glory, but also pays more attention to the future development of the financial industry. In 2020, China began to test the digital yuan, which could revolutionize the currency of the future. At present, especially in the face of the devastating impact of the epidemic, the digital renminbi may not have attracted the attention of many corporate CEOs, but it is time to pay attention to the changes in the financial environment. Cryptocurrencies and the future of international economic relations China has launched a digital renminbi pilot program in several cities for the future of international economic relations, and is looking to expand the scope of the pilot program to other regions, officially known as “Digital Currency Electronic Payment (DCEP).”

DCEP is a fully digital version of the Chinese yuan that can be downloaded using an authorized application (“digital wallet”). Digital currency includes security technologies such as blockchain, as well as near-field communication (NFC) capabilities that allow for offline transfers when two wallets (usually mobile devices) come into contact. China is at the forefront of digital currencies, and central banks around the world are also experimenting with digital currencies.

Antitrust and law enforcement in the field of the Internet Since the launch of Bitcoin in 2009 began to determine the future of international economic relations, many cryptocurrencies have appeared one after another, and the first currencies were launched by startups represented by Ethereum. Recently, well-known companies such as Facebook have entered the space with Diem, which aims to create a new global digital ecosystem. The People's Bank of China may be the first central bank in the world to launch a fiat digital currency, a move expected to herald a new era of the digital economy. For more information on China’s approach, see “Trade Implications of China’s Central Bank’s Digital Yuan” For CEOs and their executive teams around the world, the rapidly changing virtual currency landscape is bound to raise questions about whether companies are prepared to operate and seize opportunities in the new environment.

Antitrust Questions If transactions in some regions are more denominated in digital currency, have we taken into account the impact on the supply chain? How will the increasing adoption of cryptocurrency and development of cryptocurrency infrastructure impact our financing and currency business?

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Reducing friction in cryptocurrency transactions? Can we keep up with the latest developments regarding the new regulatory framework for the currency, securities and tax sectors? If you haven't thought of this type of question, start now.

Digital Vitality Currently, the future of international economic relations shows an evolution. China has almost entered a cashless society and is actively developing into a digital society, so it is not surprising that China is adopting a bold approach towards legal digital currency. In 2000, there were about 23 million Internet users in China. Today, this number has exceeded 900 million, and everyone can access the Internet through their mobile phones. This digitalization process is driven by the size and distribution of China's population, as well as the high cost of building the corresponding “physical” communications infrastructure.

As a result, China's e-commerce, online and offline platforms have achieved great success. These platforms combine Alipay's WeChat payment service and Tenpay, two of China's leading digital payment systems, to support accessible shopping and a variety of everyday applications, including public transportation. Several other powerful parallel trends will continue to drive demand for digital payments and eventually cryptocurrencies. Globally, companies are promoting digital transformation. In the post-pandemic era, more and more business activities will be completed on social platforms.

KPI data released by platform companies in the United States and China can clearly see this trend. “Monthly” Active User Data Where once the focus for the future of international economic relations was on “monthly” active user data, there is now an increasing focus on “daily” business transaction data. The accelerating trend of conducting commerce on social platforms is not only increasing the demand for digital payments, but also stimulating the growth in the number of digital payment companies. The digitization of business transactions and payments can speed up transactions, create lower-cost and more streamlined currency channels, and record real-time transaction information, creating opportunities for digital currency.

Market development trends have prompted financial institutions around the world to start exploring digital currencies. Currently, more than 85% of the world's central banks1 are researching or experimenting with digital currencies. In October 2020, the Bank for International Settlements (BIS), in collaboration with seven major central banks including the European Central Bank, the Bank of England, the Federal Reserve, and the Bank of Japan, issued a report assessing the feasibility of a central bank digital currency (CBDC).

Principles of Coexistence between Digital Currencies The report focuses on the principles of coexistence between digital currencies for the future of international economic relations, cash and other payment methods, how digital currencies can be adopted without compromising financial stability, and what are the advantages of digital currencies that can improve innovation and financial efficiency. Smaller countries like Sweden and Thailand are also experimenting with their own digital currencies, and the Bahamas recently launched its first national digital currency. Read also: Everything you should know about the currency trading market The continued progress of the Chinese digital currency will accelerate the above-mentioned process: in 2020, China completed millions of DCEP transactions with a total value of hundreds of millions of dollars; It is estimated that the digital yuan will account for 15% of all electronic payments in China within 10 years.

China's digital currency test not only covers thousands of companies, but also attracts consumer participation. In January 2021, Shenzhen distributed 100,000 digital currencies “red envelopes” to citizens as holiday gifts through a lottery, and the amount of each red envelope is 200 Chinese yuan. Commercial projects that use digital currencies Commercial projects that use digital currencies are also on the rise Diem, launched by Facebook, reflects the ambitions of platform players. In addition, with the support of financial institutions, opportunities for trading virtual currencies (mainly cryptocurrencies) are increasing, and investors are becoming more comfortable with various investment portfolios that include cryptocurrencies. As the world becomes increasingly digitized and business transactions move more strongly to digital platforms, DCEP's potential increases.

At present, the proportion of RMB in global payments is about 4%, and DCEP can further help Chinese enterprises carry out trade in China and the future of international economic relations. Over time, it will also promote the global trade activities of Chinese companies. In addition, DCEP can effectively prevent fraudulent transactions, and its widespread use will improve the reputation of the RMB, and will also enhance the position of the RMB in the global currency market dominated by the US dollar and the euro.

#International economic relations #Cryptocurrencies