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Saturday, March 6, 2021

The future of money is digital, but is it bitcoin?

 

Don’t be surprised if by the end of the current decade, the e-wallet on your smartphone resembles a multicurrency account. But instead of dealing with commercial banks, you may be a customer of central banks. Several of them, in fact

 

THE idea that much of today’s cash use will shift to digital tokens is neither faddish nor outlandish, as long as you don’t start equating the future of money with bitcoin.

Sure, governments will borrow some elements of the distributed ledger technology behind private cryptocurrencies, but they will very much want to retain control of what circulates as money in their economies. Some will succeed.

Don’t be surprised if by the end of the current decade, the e-wallet on your smartphone resembles a multicurrency account. But instead of dealing with commercial banks, you may be a customer of central banks. Several of them, in fact.

Sound far-fetched? Apart from the Bahamian Sand Dollar, there’s no official online currency in mass circulation yet.

Still, digital yuan pilots are gathering pace as Beijing aims for a possible rollout coinciding with the 2022 Winter Olympics.

Sweden may be the next major nation to follow suit. The Bank of Japan has no immediate plans, but it acknowledges the possibility “of a surge in public demand” for official digital cash going forward.

Even in the US, which is only toying with the concept, digital payment vehicles that don’t rely on traditional bank accounts can increase financial inclusion among cash users, according to a September 2020 paper by Federal Reserve Bank of Atlanta president Raphael Bostic and others. Treasury Secretary Janet Yellen says a digital dollar is “absolutely worth looking at”.

Once China and the US are both in the fray, virtual money is bound to become a tool for wielding global influence by carving up the world into new currency blocs. That’s because any token will have dual uses outsidethe issuing nation’s borders.

The dollar or yuan that pops up in a phone wallet in Indonesia or India – backed by a solemn promise of taxpayers in the US or China – could be used for buying goods, services or assets internationally.

Just as easily, this new money can end up replacing domestic currency in people’s daily lives. Although this is no different from traditional dollarisation that occurs in countries plagued by inflation and exchange rate volatility, the convenience and accessibility of central bank-issued digital cash could enable “substitution at a faster pace and larger scale,” according to Tao Zhang, a deputy managing director at the International Monetary Fund (IMF). To stay in control of monetary policy, authorities in smaller economies will need their tokens to be attractive in domestic situations.

The goal for bigger nations may be different: China and the US may want to offer add-ons that make the E-CNY or the Fedcoin the preferred choice for foreigners in settling international claims.

An efficient future will be one in which all central banks’ digital currencies are interoperable. In other words, they’ll interact with one another – and with private-sector alternatives including bitcoin, says Sky Guo, the chief executive of Cypherium.

The US enterprise blockchain startup is a member of the Fed’s Faster Payments Council and of the digital monetary institute of the Official Monetary and Financial Institutions Forum, or OMFIF, a central banking think tank.

Guo is working on the challenges that will arise when sovereign money gets digitised:

How to process high volumes of transactions quickly, cheaply, and with a strong consensus among registries updated automatically across a network? How to give people a sense of privacy in everyday payments, even after the anonymity of cash is lost?

Central banks will have to make choices. Not all smartphones can run advanced virtual machines, effortlessly executing the software code for automated contracts.

Choose the wrong technology, and the unbanked population might once again get excluded. Ditto for overseas remittances, a US$124 trillion-a-year opportunity for tokens to replace an expensive network of correspondent banks moving money by exchanging SWIFT messages.

But it won’t work for small transfers if the computing power to verify transactions in a decentralised network costs too much. The ideal technology doesn’t necessarily have to be a blockchain, but it should be something “lightweight, flexible and capable of working with legacy systems,” Guo says. Above all, the distributed ledger must be transparent.

There will be other obstacles. “A driving force for lobbying against central bank digital currencies has been established among payment processing giants like Paypal, Venmo and Stripe,” Guo tells me. “Fedcoin won’t need these intermediaries to send funds.

As these companies fall victim to innovation, it’ll be interesting to see how they try to protect themselves from disruption.”

Paypal Holdings Inc, which owns the person-to-person service Venmo, contests Guo’s assertion as false. Supporting and distributing central bank digital currencies is part of Paypal’s vision of an inclusive future, CEO Dan Schulman told investors last month.

Former Bank of England governor Mike Carney, who has proposed an alternative to the dollar through a network of central bank digital currencies, recently joined the board of Stripe Inc.

One way to resolve the tension may be to co-opt the private sector. As IMF economists Tobias Adrian and Tommaso ManciniGriffoli have argued, an official virtual currency could be like Apple’s IOS operating system, with commercial banks and e-money providers running apps on top of it.

The Apple Health app may be fine for a lay user; an athlete will want something more sophisticated. Money could go the same way.

Countries will also have to cooperate with one another. Take M-CBDC Bridge. The project for 24/7 cross-border remittances using central bank digital currencies was begun by the Hong Kong Monetary Authority and the Bank of Thailand, but has now been joined by the central bank of the United Arab Emirates and the People’s Bank of China. ─ Bloomberg

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The future of money is digital but is it Bitcoin?

https://www.deccanherald.com/business/business-news/the-future-of-money-is-digital-but-is-it-bitcoin-958338.html 


The future of money is digital, but is it bitcoin?

 

 

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Friday, March 5, 2021

Digital push


 

Go big in digital or risk being left behind. The government took full cognisance of this, which saw it roll out the Malaysia Digital Economy Blueprint or MyDigital recently.

It dove deep into the national digitalisation journey since 1996 when the Multimedia Super Corridor (MSC) was initiated and picked up on several weaknesses to address before it went back to the drawing board.

The Covid-19 pandemic and its wrath further cemented the need for digitalisation efforts, not only for the economy to rebound post-pandemic but even more so to future proof the nation from any sort of further crisis.

Minister in the Prime Minister’s Department Datuk Seri Mustapa Mohamed (pic below) said the pandemic has laid bare the weaknesses and the gap in the economic structure that has to be addressed immediately.

“Covid-19 affected the B40 more than the T20 and M40. We saw the impact from the MCO on micro, small and medium enterprises (MSMEs).

“The reality is, most of the traditional or brick and mortar business owners have to shut down because they were unable to generate any revenue for months but they still had to pay their workers and for rental. Most of them have low digital literacy and it is not easy for them to move into the digital economy quickly, ” he said in a 10-point question and answer on MyDigital.

Mustapa added that there was no other choice than to accept and adopt digital technology, where the agenda is to improve the quality of life of the people, to improve business productivity and to stimulate the country’s economic growth.

He said Malaysia is one of the countries with the highest Internet usage, far higher than Thailand and Singapore.

“During the pandemic, Internet data usage rose by approximately 30%. The government sees an importance in this in empowering the business community. Business sectors are expected to grow rapidly in line with global competition and this will give our local businesses opportunities to penetrate the global market to become even more competitive through digitalisation, ” he said.

From a macro perspective, the digital economy is expected to contribute 22.6% to the gross domestic product (GDP) by 2025.

MyDigital is also targeted to produce some 500,000 jobs in the digital economy and ensure that some 875,000 MSMEs adopt e-commerce.

For the people, the target is to achieve 100% of households with Internet access and for all students to have access to online learning.

Mustapa stressed on the importance of the blueprint in bridging the digital divide among Malaysians, between the urban and rural and between the young and old.

“The Covid-19 pandemic has raised our awareness that the adoption of digital technology needs to be expedited to protect our people from the risks of the digital economy. We are expected to see a change in the digital economic landscape towards improved digital literacy, creation of high-income jobs, a simpler and better organised banking and financial management, access to better education virtually, and the mobilisation of medical facilities to remote towns, ” he said.

For instance, Mustapa said one no longer needs to rent a shop to run a business and can do so entirely online using Facebook, Instagram or WhatsApp.

While digitalisation was not something alien to Malaysia, the minister noted that the digital foundation has to be further strengthened in a more aggressive and integrated manner.

There are three phases to the Malaysia Digital Economy Blueprint – the first phase from 2021 to 2022 on accelerating adoption to strengthen the digital foundation, the second phase from 2023 to 2025 to drive digital transformation and inclusion, and the final phase from 2026 to 2030 to become the digital product manufacturer and digital services provider for markets in the region.

“The first phase places a holistic emphasis on data and digital intelligence as the lifeblood of empowering the digital economy in Malaysia.

“In the second phase, the government will look towards an inclusive digitalisation strategy where government efforts will be focused towards digitalisation engagement on a larger scale.

“This will also see the private sector empowered with human capital to encourage innovation in business areas such as the gig economy sector whereas phase three will chart the path for strong and sustainable growth in the coming decades, ” Mustapa said.

The government also hoped that the initiatives under MyDigital will serve as a catalyst for 5,000 new start-ups in the next five years and to attract unicorn companies to operate in Malaysia due to its tremendous spillover effect. A unicorn is a privately-owned start-up valued at over US$1bil (RM4.06bil).

When the unicorns perform well, Mustapa said this will contribute to the country’s cash flow and will also become the starting point to attract new foreign and domestic investments of some RM70bil into the digital sector.

“Old or young, urban or rural, or what your level of education or career is, the blueprint is for all of us. There’s something in it for everyone. I urge all Malaysians to grab the available opportunities and make the most of it. Together, we will be able to improve the standard of living of every Malaysian, ” he said.

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Thursday, March 4, 2021

Virus looms large in Penang; Foreign worker tests behind rise in factory clusters

Virus looms large in Penang 

In the final week of February, Penang saw 922 new cases.

PENANG’S Covid-19 infectivity or R0 stood at 1.01 on the last day of February, compared with the national average R0 of 0.91, said Chief Minister Chow Kon Yeow.

R0 – pronounced R-naught – is an indicator showing how contagious a disease is.

Chow said in the final week of February, between Feb 21 and 27, Penang saw 922 new cases.

Out of this, 574 cases (62.25%) were locals and 348 (37.74%) comprised foreigners.

“A total of 16,180 Covid-19 tests were done throughout that week by various health facilities under the supervision of state Health Department.

“The majority of screenings were focused on close contacts of positive patients, screening at workplaces in factories as well as construction sites, and symptomatic screenings.

“For the screening of foreigners either registered under Socso’s Prihatin Screening Programme or under employers’ initiatives in manufacturing and construction, the state Health Department reported that as of Feb 28,68,939 people had undergone screening and 2,435 positive cases were detected, ” he said in a statement after attending a National Security Council (NSC) virtual meeting on the management of Covid-19 chaired by Prime Minister Tan Sri Muhyiddin Yassin on Monday.

Chow added that the current approach was aspect-based public health as well as vaccinations.

“The Health Ministry as well as Energy, Science, Technology and Innovation Ministry are urged to continue to move in tandem with the Covid-19 Immunisation Task Force (CITF), which was specially established at the state level.

“In Penang, phase one of the National Covid-19 Immunisation Programme has been running smoothly in every district.

“Our frontliners will always remain the priority as a commitment and principle held by the state government over the years.

“Let us all together make the vaccination programme a success, which is important to revive the growth of the economy in the state, ” he said.

Chow said in the NSC meeting, the technical committee was asked to examine the standard operating procedures of the tourism sector.

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Factory clusters made up about 60% of newly-detected workplace infections in the past fortnight.


Manufacturers attribute this to more tests which resulted in a steady rise in workplace clusters as the screenings were able to pick up more cases among workers. 

Covid-19 screenings for foreign workers that ended in February have been attributed to factories making up about 60% of new workplace clusters, says the Federation of Malaysian Manufacturers (FMM).

Its president Tan Sri Soh Thian Lai said one possible reason for the increase in workplace clusters was the rise in community transmission, especially after the start of the third wave of the virus last year.

“Covid-19 is already within the community with 89% of patients being asymptomatic or showing mild symptoms.

“This is despite the government’s efforts to mitigate the spread of the virus and industries implementing the necessary standard operating procedure and precautionary measures,” he said when citing a media report in December.

Soh added that it was then made mandatory for foreign workers to undergo Covid-19 screenings, effective last December.

“The mandatory screenings were conducted in phases until Feb 28.

“As a result, we have seen a steady rise in workplace clusters as the screenings were able to pick up more cases among workers, especially those who were asymptomatic,” he said.

Based on Health Ministry data from Feb 13 to 28, factories contributed to 92 out of 146 new workplace clusters (63%) that emerged in the last couple of weeks.

This is an increase from the period between Jan 28 and Feb 12, where 49% of new workplace clusters were located in factories.

Other notable workplace clusters from Feb 13 to Feb 28 were construction sites (12%), markets and restaurants (8%), public administrative centres (3%) and educational institutions (2%).

Even when including non-workplace clusters such as community clusters, factories still made up 52% of the clusters.

Among the factory clusters, about 47% were located in Johor, while Selangor and Penang made up 34% and 7% respectively.

Soh said FMM had reminded its members to implement proactive measures to prevent Covid-19 outbreaks at the workplace and at workers’ living quarters.

“Among the measures are paying greater attention to workers’ hostels and housing, ensuring compliance with strict SOP, including the requirement for physical distancing in the living environment and imposing such requirements on sub-contract workers.

“We limited the capacity of vehicles or buses ferrying workers to 50% or less to ensure physical distancing.

“We implemented measures such as working in rotations or relocating staff to minimise closure of entire sections. We also appointed a senior management member of the company to oversee SOP compliance at the workplace,” he said.

However, Soh said there had been difficulty in monitoring and controlling the activities of employees outside the workplace.

Complying with housing standards for workers also proved a challenge as there was acute shortage of accommodation space, he added.

“There is also a lack of centralised living quarters to house workers, and it has been challenging to get approvals from the local councils for the use and conversion of shoplots as accommodation,” he said.

Soh said there were also strong objections from resident associations and joint management bodies when trying to house workers in residential areas.


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