The European Central Bank (ECB) released a new report this month that focuses on the development of the EU’s Central Bank Digital Currency (CBDC). Titled ‘Report on a digital euro,’ the document explores the intricacies of a new digital currency and how it could affect the European payment landscape. While the Central bank specified no timelines or road maps, we know that the report implies a potential start date for the digital euro’s development process.
According to the paper, Europe seeks to stay consistent and up-to-date with current technological innovations and achievements. Of course, this also includes blockchain, decentralized oracles, and smart contract technology. ECB notes that more and more citizens adopt digital payments as a form of transaction. Therefore, the quickly evolving monetary landscape challenges Europe’s legacy financial systems.
To combat this, the ECB created a High-Level Task Force team in January this year that would advance the development of a CBDC. This team would partake in analyzing all the necessary aspects required for successfully launching a digital euro, including technological features, legal frameworks, and business technicalities. Based on this information, we see that the ECB seeks to introduce the groundwork for the future digital currency before it starts to technologically develop it. This is a stark contrast compared to Europe’s direct competitor, China.
On the other side of the world, the Chinese economic superpower seeks to establish itself as the first blockchain nation. In the past few years, the People’s Bank of China (PBoC) revealed its development of the digital yuan on multiple occasions. With research starting as early as in 2014, President Xi Jinping finally revealed the nation’s goal to introduce blockchain technology to regular citizens in October 2019. After the leader’s ‘blockchain speech,’ China set in stone the future massive adoption of blockchain technology.
High competition in the blockchain race
So far, only China and the European Union have publicly disclosed their serious intention to support blockchain-based digital currencies. There have been rumors coming from several other countries, such as Russia and the United States. However, both of them have shown no decisive determination to digitalize their currencies, at least publicly. Therefore, the so-called global blockchain race is limited to only two major economies.
On one hand, we have the slow European bureaucrat who sacrifices innovation for the sake of creating a legal framework first. Then, we have the complete opposite. China, an authoritative country that will do anything to succeed in its goals. Similarly to the EU, the Asian country has also created several associations, teams, and groups for blockchain. Most notably, China launched the Blockchain Service Network (BSN), a financial infrastructure project which is already live.
Furthermore, we already know when the EU and China plan to launch their respective digital currencies. In the new report, the ECB stated that the analysis of the potential digital euro will be finished by mid-2021. Therefore, we can deduce that Europe can, at the earliest date, develop the digital euro starting from 2021. Per the report, the next year will be spent on analyzing the digital currency, its prospects, compatibility with other systems, and various other aspects.
While Europe plans to start developing its digital currency in mid-2021, China will launch it by that date. According to the Red Date Technology CEO Yifan He, a serious partner who participates in the BSN’s development, the infrastructure network will support stablecoins starting from 2021. Since China will probably remain hesitant to adopt foreign private stablecoins, it is most likely that the BSN will support the already developed digital yuan.
The question remains, who will win the blockchain race in the end? Based on the previous information, we know that China has a clear advantage. However, that advantage is purely limited to time. While the PBoC worked on the digital yuan for a far longer time, that does not mean that China has a 100% chance to win the race.
The global blockchain race is comparable to the story of ‘The Tortoise and the Hare.’ China, the hare, rushes to reach the finish line caring for nothing else. Meanwhile, the EU as the tortoise takes it time to slowly reach the goal of making a digital euro. Even if China launches the digital yuan first, it is extremely unlikely that it will be adopted beyond Chinese borders. Just as how the 5G race progressed, so will digital currencies.