Monetary authorities of Japan, the U.S. and Europe are increasingly focusing their attention on central bank digital currency (CBDC) in response to the emerging possibility that the Chinese government could become the technological and institutional leader in the field through the rapid development of a digital renminbi.
A joint statement issued on Oct. 13 after a G7 Finance Ministers and Central Bank Governors meeting called on nations that issue a CBDC to ensure transparency, the rule of law, and sound economic governance. The use of these phrases that are often purposely inserted to check China indicates the countries’ wariness over China’s digital advancement.
“Japan, the U.S., and Italy were particularly keen to put together the joint statement,” a source close to the G7 discussions said.
Originally, the U.S. was not a member of the CBDC study group launched by Japan and Europe in January. “The U.S. attitude changed around the period from May to June, when the U.S-China conflict deepened over the issue of Hong Kong’s autonomy,” said another source. The U.S. now collaborates with Japan and Europe to put a stop to China’s one-man show.
Chinese loans to emerging economies and developing countries are often disbursed in renminbi. Those loans could eventually be digitalized. A Bank of Japan official says, “If digital renminbi were to be used widely in many countries, China could find itself in a position to standardize digital currencies.”
China has reportedly applied for a number of CBDC-related patents. Western countries are driven by the ever-deepening concern that China might establish itself as the leader in the digital-currency platform–the country that defines the technology and designs the system where it circulates.