Yesterday in conversations with my friend and colleague quantitative trading Toni from Mallorca, we were commenting that a friend had requested information to buy the future central currency of China. The conversation ended with a question, Why does your friend want to invest in a centralized currency that may not even be a cryptocurrency real?
So, in this article opinion I will talk about what is possibly the first national currency in Europe to go on sale. On July 23, the Central Bank of Lithuania has announced the preliminary sale of national cryptocurrencies (CBDC), with the name LBCOINAnd if everything goes as expected, LBCOIN will be launched on the market in mid-summer 2020, considered the first CBDC to go on sale in the EU.
As far as I have been informed, the Central Bank of Lithuania will issue a total of 24,000 tokens blockchain-based digital NEM. Portraits of 20 very significant people who signed the Declaration of Independence of Lithuania in 1918 will be placed on the new digital tokens. According to the Central Bank, these historical figures will be divided into six professional categories, and each of them will be assigned its own digital token: priests, presidents, diplomats, engineers, scientists and public servants. In my opinion they have considered a very unrevealing resource imitating the Fiat currency in its clearest reflection of the ugly duckling in the lake.
The fact that the chosen blockchain is NEM for the circulation of LBCOIN was confirmed by Academy According to statements by the analyst BuyShares from Lithuania, Justin Baltrusaitis.
But what is the need to launch a national cryptocurrency?
Marius Jurgilas, deputy director of the Bank of Lithuania, in an interview emphasized that in his department «They realized that there is a risk that sooner or later someone will take a leading role in the matter [of launching a national digital currency]«. The representative of the country's financial regulator also admitted that the demand for digital payment methods is growing in Lithuania, and the Central Bank cannot fail to respond to this. So it's better to join the enemy just in case things go wrong.
Jurgilas noted that LBCOIN will help Lithuania to take a leading place in the development of digital fiat currencies. During the pre-sale, you will be able to purchase six LBCOIN tokens for € 99. The regulator expects users to start buying and selling tokens of different categories to eventually maintain a specific liquidity of LBCOIN. And the really curious thing comes when they tell us that later, this token can be exchanged for a physical silver coin from the Central Bank with a nominal value of € 19,18.
In my opinion it will be a mere laboratory test. where clearly the underlying asset will be quickly offset by rapid consumer demand.
LBCOIN will be traded both on the supposed Central Bank blockchain and on private decentralized exchanges, it is said, although this point is not clear. And I wonder if by now there will already be an unnamed agreement for the allocation of the exchange in question by way of a public tender.
The Bank of Lithuania's entry into the CBDC market indicates that competition among the world's central banks is increasing. However, In my opinion, this will create a problem and a reference, since the Lithuanian financial regulator cannot, within the framework of the commitments made by the 19 eurozone countries, introduce its own national currency instead of the euro as legal tender, this will bring friction in the European Parliament, no matter what. I am sure that it will be a trigger for new internal fights since the demand for the launch of the digital euro is growing and in fact the Italian Banking Association (ABI) has already expressed its opinion in a statement to the European Parliament.
Also, on November 26, 2019, Benoit Chur of the Board of the European Central Bank (ECB) made it very clear that the euro in its current form does not solve the key problems associated with the low efficiency of cross-border payments. And this is that the ECB now has few options: either the regulator launches a digital euro or global stablecoins from other territories could take the lead. They could even compete with digital currencies of large corporate groups.
Commenting with my friend Toni, we made it clear that global competition had opened its way, as in economic powers as large as China it was bidding hard. Now with the digital yuan, a project of the People's Bank of China which is one step away from launch and is already undergoing testing in four cities in China (Shenzhen, Suzhou, Xingang and Chengdu), the race seems to have begun. And the Chinese authorities are already creating a very ambitious regional project for a stable currency or stablecoin, which will be launched on the basis of four fiat currencies (Chinese yuan, Japanese yen, South Korean won and Hong Kong dollar) and will therefore operate in the economies of at least four countries.
In my opinion, China is still fighting for de-dollarization and when it achieves this, it will be able to play its most important card with the US, I am talking about the public debt that China holds in dollars.
In conversation with my colleague, we discussed the importance of the nature of digital currencies and cryptocurrencies, especially those that are privately based, with their centralized and inflationary character. However, this of course creates legal conflicts and also raises the question of how the various financial regulators will react to the fact that national digital currencies are circulating in their country's economy and in many cases sharing a bed with constitutional currencies with their own right. Therefore, in this situation, the only effective way for regulators to interact during fundamental changes in the global financial system would be the launch of a global CBDC promoted by some consortium such as the G20 or something similar. But I really have serious doubts that the US government would allow this. the demise of the dollar.
And the mess that is being consolidated is not minor and we will see it in the future, unless I am mistaken. To support all this that I am writing, I point out other cases such as that of a Monetary Authority that has decided to start working on its own CBDC. And this is a trend that we have been seeing for a few months now, as we saw in April that six major central banks also announced joint work in the study and selection of projects for the launch of CBDC. Ravi Menon, Managing Director of the Singapore Monetary Authority, stated that CBDC is a hot topic and that national authorities and private projects should work together to launch national and global stablecoins.
The same conclusion can be drawn from a study recent of Royal Bank of SwedenThe regulator honestly admits that the costs of creating infrastructure for the circulation of the digital crown seem too high and that there should be global coordination.
The big concern, the US dollar under pressure CBDC
As I wrote earlier, many countries tend towards de-dollarization. All state CBDC projects ultimately appear global, i.e. capable of going beyond national economies. And thus, they pose risks to the status of the US dollar as the cornerstone of the global financial system, which has existed unchanged since the end of World War II. And this is a problem and not less I'm coming announcing for over a year in my various publications.
Some have already taken a stand on the matter, the former head of the Commodity Futures Trading Commission (CFTC) Christopher Giancarlo In January of this year during a speech at the IMF he declared that The United States needs its own CBDC as the digital yuan could displace the US dollar from its leading position in the global economy.
Interestingly, in this situation, the US financial authorities are clearly in no hurry to enter the fight for leadership in the launch of the CBDC. On June 17, the head of the Federal Reserve from the USA, Jerome Powell, at the hearing before the House Financial Services Committee, commented that he “still needed to understand digital currency,” but definitely understands that in any transformation of the global financial system the leading positions for the US dollar should be clear. audiences June 30, organized by the Senate Committee on Banking and Urban Planning, were entirely dedicated to the topic of “Digitization of money and payments”, but also ended with general statements that «The United States needs innovation«.
Continue reading: China seeks to promote its CBDC in international transactions
