WILL China’s central bank digital currency (CBDC) experiment be a success? Offering 50,000 Shenzhen citizens a wallet containing around US$30 in a lottery has created momentum.
Banning the prospect of any other blockchain-based money and adopting a rigorous approach to encouraging retailer acceptance has been helpful. The citizens of Shenzhen were ready for a CBDC – two million of them applied to participate in the experiment.
The architecture of money is changing. The pandemic has led to a collapse in the use of cash around the globe. A desire to avoid touching notes and coins has combined with the expanded availability of cashless payment options in shops and a surge in online shopping.
Central banks everywhere have been jolted into action. It seems inevitable that the squeeze on cash will trigger multiple CBDC initiatives. Many will share some of the technological characteristics of crypto currencies such as Bitcoin, but will differ in three important ways.