According to Deutsche Bank Research, the digital yuan designed in China could seriously challenge the hegemony of the US dollar. Researchers are also of the opinion that digital payments could ultimately be the reason of the plastic card's death.
Deutsche Bank: China can dominate the global financial market
Deutsche Bank Research has published another report regarding the ways of payments in the future, digital currencies to be more specific: Digital Currencies: The Ultimate Hard Power Tool. The report focuses, among others, on the digital currency of the Central Bank Digital Currencies (CBDC) which is developed by the People's Bank of China (PBOC).
Researchers claim that if the Chinese government took a firm position on the digital yuan and forced domestic companies to adopt the currency, the dollar hegemony could be dealt a massive blow. And that is, of course, given the significant economic strength of Beijing.
"China is working on a digital currency backed by its central bank that
could be used as a soft- or hard-power tool... If companies doing business in China are forced to adopt a digital yuan, it will certainly erode the dollar’s primacy in the global financial market."
The opinion of the researchers is that the first "big" digital currency of the central bank on the market will also have a significant advantage over commercial digital currencies like, for instance, Libra developed by Facebook or any currencies of other corporations. In contrary to central bank digital currencies, private digital currencies lack regulatory approval and are, therefore, significantly weakened.
The end of "plastic", the survival of cash
When discussing the future of payments, people usually say that the end of cash is imminent. Deutsche Bank's researchers, however, have a different view on this subject. Even though the development of payment digitization is rapid, the experts think that cash payments will remain popular for decades. They add, though, that the emergence and further development of digital payments will ultimately lead to the "death" of payment cards.
"While cash will stay, the coming decade will see digital payments grow at light speed. That will lead to the death of the plastic card."
- write experts in the report, adding that in developing countries a great number of customers switch directly from cash payments to mobile payments, without even having a plastic card.
What is interesting is the fact that the publication praises in particular central banks and strict regulations and at the same time criticizes cryptocurrencies, especially those ensuring greater anonymity.
"Specifically, private cryptocurrencies
significantly increase the risk of financial crime. We expect that technological solutions and regulation will evolve to sufficiently address this concern."
- said the experts and add that cryptocurrencies are required to become legitimate in the eyes of both the governments and regulators.