President Biden has one key challenge in his presidency: China. Yes, everything is going to come around China as China opens a playbook to “overtake” US economically, and disintermediate the US dollars. China is creating a digital Yuan, and if that happens, and it reduces transactional friction in commerce, China can scale that mission through its global sovereign lending apparatus.

China has begun the third round of its digital currency testing. The exercise took off on January 20, in Shenzhen, as part of a larger scheme to introduce the E-Yuan in mainland China. As part of the project, a total of 20 million digital yuan will be issued to residents of the local Longhua District.

Pandaily reported that up to 100,000 so-called “red envelopes”, each with an amount of 200 yuan, will be given out to those who have purchased social insurance from the commercial entities they work for and intend to stay in the jurisdiction for the upcoming lunar new year holiday.

While dislodging the US dollars may not happen in North America and Europe easily, Africa and Latin America could easily fall into place, faster. And if that happens, you could see a new equilibrium on currency emerge. 

Sure, people do argue that China cannot assume that position due to its recent history. Possibly, but we need to understand one thing: technology reduces the trust burden by making it easier for demand and supply to attain new equilibrium faster through removal of information asymmetry.  

A digital yuan will do what Uber did on our fears (allowing strangers to give us rides), and Airbnb did on grandma’s warning (comfortably sleeping in a stranger’s house). So, while the analog Yuan may not have been trusted, the digital yuan can tap into the pervasive digital trust-enhancing systems to elevate its acceptability in global commerce.

So, as we thank Mr. Biden for taking Nigeria out of that dreaded 13-nation “ban” list which his predecessor lumped Nigeria alongside Yemen and Somali, he has work to do to keep his national currency the default for global commerce.

For Nigeria, I have long maintained that if we move fast, we can make Lagos the epicenter of the new (digital) currency in Africa. The opportunity remains for that. We need to watch both frontal and flank attacks from mid-size and smaller nations like Rwanda and their positioning on this. The US has largely not bothered on the potential dislocation from cryptocurrency but the fact remains that Bitcon may not be its challenge, rather e-yuan may be the real threat to the US dollars.

Jerome Powell, the U.S Fed Reserve Chairman, spoke on Bitcoin and cryptocurrency, among others. Here are excerpts. The full video below.

“Since we are the world’s reserve currency, we actually think we need to get this right, and we don’t feel an urge or need to be first,” he said. “We effectively already have a first-mover advantage, because we’re the reserve currency.”

“We’ve been very focused… on potential regulatory answers for global stablecoins, in particular,” said Powell in response to a question about CBDCs, or central bank digital currencies.

“So that’s been a high-level focus, and that will continue to be a high-level focus because they could become systemically important overnight and we don’t begin to have, you know, our arms around the potential risks and how to manage those risks, and the public will expect we do and has every right to expect that… It’s a very high priority.”

Comment on LinkedIn Feed

Comment #1: Prof. Bitcoin is a liquidity blackhole; and every enlighten government is aware of the inherent threats it poses to her hegemony of its economy. China is not the first to go this route. Venezuela came up with the Petro (digital fiat) in 2017, but it flopped.

While creating a digital Yuan is one thing, the nature of the currency is another. Will it be inflationary or deflationary; will it have a limited supply, or it will be infinite printing like the traditional fiat of every nation state is today.

Digitization of fiat currencies by any sovereign state is, for me, an attempt to compete with Bitcoin or other digital protocols and assets like Ethereum. The missing pieces are decentralization, trust, freedom and perception.

Bacause a sovereign state is always susceptible to the financial priest, governments, politicians, and most of all, inflation; I don’t see the people adopting any of her copycat digital currency for long, as these are the antithesis of, e.g. Bitcoin.

As more of these smart contract platforms continues to scale in usage, economic bandwidth and more technological advancements like we’re witnessing with the rise of DeFi on Ethereum, the digital Yuan or any similar nation state currency, will be dead on arrival.

My Response: I am not sure we can compare Venezuela with China in anyway. Unlike the South American nation, China has leverages at global level: it is the world’s factory. If China digitizes Yuan, buyers from China will save between 10-15% lost via USD intermediation. Doing that is not rocket science: have fintech and banks (OPay, Flutterwave, GTBank) as agents where people can use Naira to get E-Yuan with wallet credited. Go to Alibaba website and pay Chinese merchants (who will not list on Yuan, not USD) directly. Because transactions are cleared in Beijing, USD goes. It does not need to be decentralized at origination but it needs agents to work.

China is on the 3rd trial after the 1st and second trials went fine. E-Yuan is not crypto, it is avoiding clearing global transactions from New York and London via wallets maintained in Beijing. The deal is eliminating inter-border frictions but warehoused in China. People will use it to save 15% on cost. Visit NAU Awka, Igbo traders are learning Chinese in the Confucius school to help them cut-out merchants in China and buy directly from factory who typically speak only Mandarin. Tell those men by removing USD, they can save more, you will be surprised.

China Launches Third Trial for its Digital Currency – E-yuan

China has begun the third round of its digital currency testing. The exercise took off on January 20, in Shenzhen, as part of a larger scheme to introduce the E-Yuan in mainland China. As part of the project, a total of 20 million digital yuan will be issued to residents of the local Longhua District.

Pandaily reported that up to 100,000 so-called “red envelopes”, each with an amount of 200 yuan, will be given out to those who have purchased social insurance from the commercial entities they work for and intend to stay in the jurisdiction for the upcoming lunar new year holiday.

The pilot run will be conducted in the form of a lottery, similar to former experiments. At 10:00 a.m. on Jan. 26, the event will draw lots to select 100,000 winners, according to local media Yangcheng Evening News.

This is the third round of digital currency experimentation going on in the city.

The first test was held in Luohu District, where the central bank issued 10 million e-yuan in October 2020. When a second round was conducted in Futian District at the beginning of this year, transactions rose to as much as about 18 million yuan in the ten days between Jan. 7 and 17.

The second round also expanded the e-yuan use scenarios, increasing participating merchants and shops from 3,000 to more than 10,000. Among the fields covered were transportation, medical, entertainment and retailing.

The newly-launched round also added two more supporting banks – the Bank of Communications and the Postal Savings Bank of China.

Besides Shenzhen, the central bank last year carried out closed tests in Suzhou and Beijing.

Pandaily reported that the digital currency frenzy is not confined to the mainland, as Hong Kong is also looking forward to testing digital currencies in the near future.

On Dec. 4, 2020, the city’s Monetary Authority began working with the Central Bank’s Digital Currency Research Institute to study technical tests for the use of digital currency for cross-border payments, and make corresponding technical preparations, according to the official former’s website.

Since 2014, China has been studying merits and demerits of digital currency and how best to roll it out so that it doesn’t disrupt existing financial structure. Developing a national digital currency involves complex technicalities that take time, and if done wrongly, would make users lose their money.

China is pushing to become the first major country in the world capable of monitoring economic activity in real-time through digital currency called e-yuan, and the central bank governor, Yi Gang wants to learn real-time data management from the private sector to guide the growth.

The e-yuan, called Digital Currency Electronic Payment (DC/EP), will facilitate e-wallet payments in place of fiat, allowing citizens to carry out financial transactions digitally. The Chinese central bank is speeding the project up as it aims to develop a cashless economy.

Former IBM executive, Richard Turrin who is writing a book on China’s digital currency said “the time table has been sped up by the coronavirus and the realpolitik of US-China relations.”

But apart from that, China recently has increased its oversight on its online industry, including the fintech sector which has blossomed without government’s regulatory interference over the years. The recent clampdown on big players in China’s online financial space, including Ant Group, shows the government’s growing interest in the sector. And the launch of e-yuan which is supposed to be in partnership with big players in the fintech, is believed to be part of the government’s ploy to keep an eye on the industry.

Moreover, China appears keen to lead the world of digital currency by being the first country to launch national digital money that is widely used across the country. The plan is believed to have been accelerated by the outbreak of COVID-19 and US’ disapproval of Libra.

“China is positioning itself as a trailblazer when it comes to the future of money,” said Henri Arslanian, a cryptocurrency mogul and adviser to central bank. “Libra was the catalyst, and COVID-19 has accelerated central bank activities.”

However, there have been concerns about how a national digital currency will affect the banks.

The PBOC told the IMF that the e-yuan will be likely limited to small retail transactions by setting maximum daily and yearly limits on payments and that it will only process large amounts by appointment. It added that it may apply charges for large sum or high-frequency transactions, and will not offer interest on accounts.

The central bank conducting the third digital currency trial indicates that a promising amount of success has been recorded, and that China is on the verge of releasing e-yuan for national use.

Ada found out she was pregnant barely five months after the previous one. She was thrilled and afraid at the same time. Her husband, Obi, was uncomfortable because his business was going through some challenges and he still had to take care of his family, including his five-month-old twins. However, considering that Ada delivered the set of twins vaginally, they hoped this second one would also come without complications. But alas, they were about to be shocked.

Seven months into her pregnancy, Ada began to notice the pregnancy came with challenges she didn’t experience in the first one. She began to experience false labour, especially at night. She complained at the antenatal clinic and was told it happens to many women and she has nothing to worry about. By the eighth month of her pregnancy, the contractions continued even though the cervix wasn’t opening. In addition to this, she began to retain water on her legs. But maybe she didn’t see it as a problem, after all, it happens too. However, the midwives at the clinic began to worry because the foetus was lying in a non-cephalic presentation. She was sent for a scan and it was also discovered the foetal weight was much. That was when Ada was referred to a doctor.

Of course, doctors don’t take chances with pregnant women, especially when there are issues. The doctor told Ada to start preparing for the caesarean section (CS) and nothing more. Ada told her husband, Obi, and they both went to meet the doctor to see what it will take to have CS. Well, your guess is as good as mine. Anyway, Obi didn’t have the amount of money the doctor mentioned as the initial deposit. He began to call for help but many turned deaf to his plea – it’s his responsibility, right? Well, suggestions began to come from left, right, and centre; and the poor man and his wife began to listen to them – do they have a choice. This was how Ada was taken to a woman that is “an expert in repositioning foetus”, and later taken to another hospital for delivery when labour started fully. To cut the whole story short, Ada’s labour lasted longer than normal and they still had to go for CS. But unfortunately, Obi lost Ada and the beautiful daughter that would have been born to him.

This story is real; the only difference is the changes in the names.Many people may relate to this couple’s experience. Some women died as a result of something like that. Many have been incapacitated for life because of such an abysmal experience. It is easy to blame people like this when you have not been in their shoes but, believe me, you may do exactly what that couple did if you find yourself in their position. Today, Obi laments his wife’s death and blames it on lack of funds. According to him, if he had the amount the first doctor demanded, he wouldn’t have sought help or even heard all the suggestions they followed. This is why it is unacceptable that pregnant women should be expected to pay for their delivery through the out-of-pocket method. They should be mandated to obtain health insurance before their due date.

Pregnant women are not the only ones that need compulsory health insurance. Children do too. According to the World Bank, in 2019, the mortality rate of children below the age of five was 117 deaths per every 1000 live births in Nigeria. Of course, this figure was derived from reported cases when deaths happen in hospitals. This does not include children that died at home because their parents could not afford hospital bills. Furthermore, the World Health Organisation (WHO) reported that in Nigeria, the maternal death rate in 2015 was 800 deaths per every 100 000 live births. According to the organisation, 58 000 maternal deaths occurred in the country in that year alone. The problem here is that the rate is increasing because, according to Index Mundi, the maternal mortality rate in Nigeria in 2017 is 917 deaths per 100 000 live births. This is becoming worrisome.

It should be noted that infant and maternal mortalities in Nigeria are not caused by poor medical services. This is far from it. Even to date, we still hear about women going to non-professional midwives for delivery. We still see those taken to “churches” for prayers because their labours are prolonged and, hence, it must be the hand work of the “enemy”. We still see people avoiding antenatal classes because they couldn’t afford them (especially when the Primary Health Centres in their communities are non-functional). In Nigeria today, the major cause of maternal mortality is the lack of access to proper health care. This is the same with infant mortality.

It will be improper to blame the government for these death rates because the government has put things in place to curb them. For instance, antenatal classes in government hospitals are free and so are deliveries. All that the woman had to provide are materials needed for the delivery. However, if CS is needed, delivery is no longer free; this is where many women encounter challenges.

But a woman that is covered by health insurance does not have to worry about money for delivery. As far as I know, a woman that is duly registered under National Health Insurance Scheme (NHIS) does not pay a dime for her delivery, even if it is through CS. Even the child she gave birth to will be covered by her insurance until he/she is three months old. So, why do our people take chances with their lives when there is an easy way out?

Many people, to date, think NHIS is a scam. Some think it is for government employees alone. They are not to be blamed because the level of publicity of NHIS is low. But those that have discovered about it and its benefits do not hesitate to register with them. However, NHIS is still voluntary in the country; something I believe should be changed for pregnant women and children. It is left for the appropriate quarters to insist that pregnant women and children should, compulsorily, be covered by health insurance. How they will go about it is up to them.