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One is the poster child of Silicon Valley capitalism. The other is the world’s biggest communist state.
Facebook and China couldn’t be more different, and both are ready to upend global fintech with their own digital currencies.
A Sort of Crypto-Venmo to Start
On Tuesday, sources told CNBC that a Facebook-backed digital currency known as diem will launch in pilot form later this year.
- Diem will first operate as a single stablecoin, pegged to the U.S. dollar.
- At first, the currency will be used for transactions between individuals — a crypto-venmo of sorts — but may expand to purchases for goods and services.
This isn’t Facebook’s first kick at the can. In 2019, it tried to launch a universal digital currency tied to a basket of global reserve currencies. But regulators slammed the idea, fearing a digital currency for Facebook’s 2.8 billion users could threaten monetary stability and enable money laundering.
“It was such a stunning challenge to the international order, in that the backlash was just really powerful,” Michael Casey, chief content officer of CoinDesk, told CNBC. This time, the rollout plans are more measured, and Diem is in talks with Swiss regulators for a payment license.
Watching Your Wallet
China, meanwhile, is taking matters into its own hands. The country’s Digital Currency Electronic Payment (DCEP) is already undergoing pilot programs in major cities, and a wider rollout is planned in time for next year’s Beijing Olympics.
- Some officials hope the DCEP will internationalize China’s currency, others view it as a way to eliminate the inefficiency and cost of physical cash and coins.
- “Whoever grasps this advanced productive capability will possess the strongest core competitiveness in finance,” Chinese central bank vice-governor Fan Yifei said in November 2019.
But DCEP will also create an unprecedented mass surveillance program — a state-backed digital currency means the government will have direct access to individual user transactions, and that it could shut down the accounts of dissidents, human rights activists, and members of persecuted groups.
Tokenized money is more a matter of when than if at this point. Facebook’s might has already drawn huge partners to the diem project: Shopify, Spotify and Uber are already on board.