The Bank of International Settlements in its own studies discovered that at least one-fifth of the world’s population will use digital currencies within the next three years. This clearly shows the robust interest and the speed at which the countries are transforming their national “Fiat” currencies into the digital currencies. With the advancement in technologies, economic aspirations, and social developments, all are adding further momentum in embracing the digital currencies to benefit from the fast explosion of the ecommerce globally. Even today, all transactions, regardless of whether they are charged to a debit card or wired, pass through a digital network that is owned and controlled by a consortium of banks.
China, the first major economy, has already started testing its e-yuan in May 2020 in its four cities — Shenzhen, Suzhou, Chengdu, and Xiong’an. Besides other international and local consumer chains and stores, McDonald, Starbucks, and Sunway are the approved participants, in addition to the government services in the trial. The country’s e-yuan is distributed to the consumers by the Central Bank of China through six major commercial banks via e-Wallet application. After this trial success, e-yuan will be rolled out to other major cities before converting its entire Fiat currency into digital. Use of e-yuan will give instant and accurate consumer spending data to the economists and the policymakers to assess the consumers’ behaviors and state of the economy.
As a matter of fact, China was already ahead of the world in moving to a cashless society away from the bank notes, coins, and credit/debit cards into technology and social networking cashless payment system, developed by Alibaba and Tencent through Alipay and WeChat-pay platforms through the use of Smart-Phones. This payment system has over one billion of users and has completely replaced cards and cash at the checkout registers and is also very popular for peer-to-peer payments, and even by beggars asking for money, through the QR codes!
To test its digital currency’s (e-yuan’s) resilience, safety measures, firewalls, seamless & secure transaction experience by other nations, during the upcoming Winter Olympics in 2022, China will allow the visitors to use e-yuan. After submitting their passports information to Chinese central bank, the foreign visitors will be issued e-wallets that will enable them to use e-yuan for all kinds of shopping and transactions within China.
Currently, in addition to China many Caribbean nations have already issued their own digital currencies.
Sweden has already started testing its e-krona as an additional payment method, while Norway is not far behind in catching up with the digital currency revolution.
EU central bank has also planned to launch its digital EURO (e-€) within the next few years.
US central bank (Federal Reserve Bank) is also in the frontline for its own e-dollar (e-$) roll out.
In Africa, Nigeria has taken the lead by introducing its e-naira late last month. This is applauded by the IMF (International Monetary Fund) and others as it will help the country in eliminating the corruption and ML (money laundering). Other African countries such as Ghana, Senegal, South Africa, Tunisia, and Morocco, they all have very active plans to introduce their own digital currencies soon.
Since the digital currency (e-wallets) tags its owners, regardless of owners account balance, everyone in society will have access to the same level of services (supporting inclusivity). Transactions tracking and transparency will provide tools for apprehending and prosecuting the money laundering (ML) individuals in timely fashions that will result in elimination of the fraudulent accounts keeping, corruption and ML, the deeply-rooted parasites in Pakistan’s political and bureaucratic systems, which were inherited from the colonial masters as part of their banking culture.
Additionally, digital currency will create and reinforce rail guards and firewalls against the ML and corruption from society, as there will be no physical money in circulation, no one will be able to buy the hard currencies from the black market. Besides the e-wallets balances, there will be no physical hoardings (under the pillows or in the house vaults), thus transferring of e-Rs into personal offshore accounts will not be possible. Also, since every transaction will be fully recorded and the total amount of the e-Rs will be tallied frequently by the digital infrastructure of the SBP, all the transactions will be fully accounted for and traceable. Thus, e-Rs implementation will literally eliminate corruption and the ML from society, once for all.
Like for other countries, e-Rs rollout is not a matter of choice for Pakistan, but it is just a matter of time! Soon world will be a cashless society! Thus, in Pakistan’s best interest, sooner the e-Rs is rolled out, better it will be for rooting out the widespread corruption, money laundering, robberies, and black marketing from society. This digital journey will transform Pakistan into a robust, vibrant, inclusive, resilient, self-sufficient (without any assistance need from the IMF, WB, ADB, etc.) productive, cost competitive, and most importantly, a great place for the FDI by the international investors.
(The writer is Executive Director, Polykemya Int’l)
Copyright Business Recorder, 2021