Virtual currencies are multiplying in the Western world. Central banks don't want to lose their hand to the private sector

In Washington, Frankfurt and Silicon Valley, in the cozy halls of central banks as well as in the offices of digital giants, we watch the Chinese experiment around the digital yuan with a mixture of curiosity and concern. Curiosity, because this full-scale test offers an overview of the possibilities opened up by “central bank digital currencies” (MDBC), as the experts call them. Concern, “because getting ahead of this technology could allow China to dictate future developments in global payment infrastructures, those facilitating cross-border trade and remittances,” summarizes Aditi Kumar, a specialist on the subject at Harvard University

Today, nearly 80% of the world's central banks are studying the possibility of creating their own digital currency, based in particular on blockchain (a technology for storing and transmitting information), according to the Bank for International Settlements. A handful of them have already started experimenting. “There are two very different types of MDBC,” says Patrick Artus, chief economist at Natixis. The first is reserved only for settlements between banks, while the second is intended for individuals — it is, therefore, the digital equivalent of notes issued directly by the central bank. “This second form of currency would not involve bank deposits, like the euros or dollars that are currently used for payments by credit card or bank transfers

For several months, the Banque de France has been experimenting with the first type of MDBC. In October 2020, the European Central Bank (ECB) launched a public consultation on the advisability of creating a digital version of the single currency for citizens, in addition to cash. “We will have a digital euro”, predicted its president, Christine Lagarde, on Wednesday 13 January, adding that it would nevertheless take time. The Bank of Sweden, on the other hand, has been working on an “e-krona” since 2016. Tested for a year, it could complement traditional crowns and be used for payments through a mobile application. For its part, the Federal Reserve (Fed, American Central Bank) is conducting research with the Massachusetts Institute of Technology.

A double challenge

In any case, the challenge is twofold: to use these new technologies to improve the security and efficiency of payment methods and, above all, not to be overtaken by innovations from China or the private sector. For example, bitcoin, created in 2008, whose price is constantly soaring. And especially Libra, from Facebook: its announcement, in June 2019, initially made central bankers feel anxious

At the time, Mark Zuckerberg's group presented the Libra project as an ambitious digital currency co-founded with 28 partners, including Uber, Mastercard or Free (whose founder, Xavier Niel, is an individual shareholder of Le Monde). Its objective: to shake up the banking system by offering “faster, simpler and cheaper” payment methods, especially for the 1.7 billion people without a bank account. The cryptocurrency had to rely on a basket of currencies, including the euro and the dollar. The founding companies were able to create electronic wallets integrated with their services, such as Facebook and its subsidiaries WhatsApp, Instagram and Messenger, bringing together billions of users around

The cocktail quickly seemed too explosive to financial regulators, who organized a roadblock against the project, in the name of state sovereignty, transaction security and the fight against money laundering. After resisting for several months, Libra has faced the defection of numerous major partners, including the PayPal payment system, which has since announced that it would accept bitcoin transactions. In April 2020, the project launched by Facebook reduced its ambitions: it is now a question of focusing on simple electronic versions of national currencies, starting with the dollar.

Delayed several times, the launch of the association's first currency, renamed “diem”, could take place as soon as the Swiss authority Finma has given its approval. Or possibly in early 2021, wrote the Financial Times

in December 2020.

For its part, Facebook is ready to launch its electronic wallet, which is also rebranded: “novi”. The application would be “in the process of being authorized”

in several countries and regions. Electronic money and online payment are still a central pillar of Mark Zuckerberg's strategy, who wants to add an “e-commerce” layer to his application ecosystem. The group has also fought for many months to obtain authorization to generalize its electronic payment test in WhatsApp to all of India, and is trying to do the same in Brazil. Faced with authorities who are skeptical or worried about his private digital currency projects, Mark Zuckerberg has repeatedly presented them as an extension of American and Western financial “leadership”. Blocking them, he argued, would be exposing yourself to the threat... from the Chinese