Geopolitical & Economic hurdles for Digital Currencies in 2021

As businesses look to grow by nudging the consumer towards the right decision, the time has also come for policymakers to be nudged in the direction of the future. Well, to be honest, it is not that the policymakers are aware of the benefits of a digital currency, however, it is their control over their current systems and what they have gained from them as insight and intelligence already matters a lot to them, they have been asked to quantum evolve with they struggle to keep up with changes in the normal technological, political and economic spheres of management. So what are the real hurdles faced by those who support and say that cryptocurrencies are standing on the legitimate ground? As of now, it would seem that the idea and how it has worked out so far without the help or support of policymakers, with bitcoin hitting new highs every day, is all the evidence we need that, there is a new ecosystem on the horizon. This ecosystem will enable the bridge between the users of the currency and the new cryptocurrency.

As mentioned above, it not the Governments of the G7 is not aware of the benefits of digital financial technology, but their main concern is the public mandate for a public policy and geopolitical threats from this potentially disruptive innovation. This threat is being mostly from the more established ‘global stable coins which are operated by loosely regulated, non-financial technology giants but are somehow getting denominated in national currencies. These challenges include very serious questions including ‘challenges to fair competition, financial stability, monetary policy and, in the extreme, the international monetary system’. so while there is tremendous potential to grow outside the normal banked consumers, no Stablecoin will be allowed to be a currency until the G7 have debated and settled on the public policy issues, which gives the public the ultimate authority and laws to govern it legally for global acceptance.

But the hurdle is that since these coins are privately owned by individuals across different countries which come under a varied set of laws, how to bring all of them together? The path together for then normally sceptic policymakers is to trust in a system, a collection of countries or a financial system that can accept a currency. Because if there is one thing that all administrators hate is global free for all creating a potentially chaotic and dangerous situation.

However, this does not deny the properly-regulated private coins or currencies, the advantages they offer to the future of finance. It is well known that they knew currencies bring in greater efficiency and lower costs for both domestic and, in particular, international payments systems. These news systems can also ensure financial services reach the hundreds of millions of people – especially in developing markets, where there is internet penetration is better than banking’s – as in those with smartphones is higher than those with bank accounts.

So who is wherewith the evolution and acceptance of cryptocurrencies?

Many countries have experimented with cryptocurrencies including Scandinavian, European, American, but it is the latest entrant China, that is likely to give it the legal legitimacy it has needed to truly grow and go global. China is the country where they have been building up to this. With their China-wide payment systems like Wechat payment for most of the transactions, the jump into paying into Stablecoins is not huge as far as technology need is concerned. Where China has an advantage and motive is at the geopolitical scale and it has been building up to this for over a long time.

Also given its experience in moving from cash to online and their already prevalent use and adoption of new coins, it has made the case for the Government to step in, and as their policies would compel, launch their coin.

In history, it could be bigger than the moment when Nixon decoupled the value of the dollar to the gold reserve, the launch of the Chinese currency will be bigger. For two reasons, like most companies of the digital age have figured out that, data is the new oil or engine for growth and the foreseeable future and this will demand a whole new currency type to trade-in.  

China’s public sector is well advanced and has responded well to such a radical move once in the past. However, what is critical to the first global central bank-backed launch of the domestic trials (digital renminbi) in 2020 went well. At the same time, it has signaled the political intent in its clampdown on Ant Group, the country’s biggest finance-focused hi-tech company. If China decides to launch its digital coin, it would sure be a huge shakeup in the crypto world. This will leave other leading central bankers with the EU and USA to follow suit for the fear of being left behind in the evolution of the industry.

But such a move also can’t be radical, there are important global decisions with implications for the wider international financial system, such as the future role of the dollar and other reserve currencies. And how they will be used to shape the new world order, especially in international trade and finance.

So why is the Chinese model likely to work?

  1. It has the infrastructure and technology penetration
  2. It has a public who has trusted the government with the move from cash to digital
  3. It has the backing of the government, so will be treated like fiat currency.
  4. Within China, that would be huge trades in the new currency giving it the case study.
  5. It can offer the new digital currency at discount for those nations wanting to balance their trade deficits.
  6. Most likely other major banks will follow suit
  7. What the currency is pegged to as a value could be changed
  8. With people moving from fossil fuels, this is where the investments will grow
  9. The recent movement of American giants into this space confirms this
  10. This will disrupt the credibility mechanism compared to existing Stablecoins which are not back the governments
  11. Transportation moving away from fossil fuels to more sustainable forms.
  12. Governments moving from fossil-based energy to sustainable energy.

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