Recent data on China’s digital yuan shows that the central bank digital currency’s (CBDC) usage is so far dominated by government and enterprise transactions.
Data taken from Jiangsu province and focused on the telecoms and media sector showed that, on average, individuals were topping up $13 while corporations and governments were topping up $9,550, according to a Ledger Insights report.
There were also more enterprise and government transactions than individual ones. Around 2,887 settlements involving payments worth 200 million yuan ($27 million) were processed by governments and enterprises between January and July.
The data shows that focusing on government and enterprise usage of digital currencies is the correct strategy in the long run.
CBDCs continue to be divisive, but they’re rolling out quickly
In a recent interview with Kurt Wuckert Jr. on the CoinGeek Weekly Livestream, U.S. Presidential candidate Aaron Day said that 124 countries are currently working on CBDCs. While China was one of the first to roll its digital yuan out, others are moving at a breakneck pace, and within a few short years, CBDCs are likely to be ubiquitous.
Yet, CBDCs continue to be divisive. While proponents point to the benefits such as faster, cheaper payments and the ability of central banks to bypass retail banks and stimulate the economy when needed, critics worry about the implications of CBDCs for liberty and economic freedom. Many fear that they give governments too much power, and, as history has shown us, they tend to abuse that power.
Whatever camp one falls into in the CBDC debate, the idea that they can be stopped is naivety and wishful thinking. CBDCs are rolling out full steam ahead.
Legal and regulatory compliance is necessary for Bitcoin
While the data on the digital yuan is limited, it gives a glimpse into something important: government and enterprise usage of digital currencies will likely dwarf individual usage.
If this is the case, the blockchains and ledgers underpinning CBDCs and other digital currencies must comply with all financial laws and regulations. While BTC and BCH may be intent on sticking a finger in the eye of governments to score a few cheap points with anarchists, this isn’t likely a winning strategy as we move into the era of blockchain utility.
In the end, not all CBDCs will run on government-controlled ledgers. Some, and hopefully the majority, will run on public proof-of-work blockchains, giving both nodes and users some control and responsibility—true decentralization.
Only the BSV blockchain, the original Bitcoin protocol laid out in Satoshi Nakamoto’s white paper, was designed to scale to handle global commerce, and it was carefully crafted to comply with existing financial regulations, meaning it is the only realistic candidate for running CBDCs.
As China’s data shows, businesses and governments are primarily interested in the cost-efficient, fast payments that digital currencies enable. Therefore, focusing on legal compliance and government and enterprise usage will likely lead to the widespread adoption of Bitcoin in the long run.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
CoinGeek Conversations with Lise Li: Why Bitcoin SV will succeed in China
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