economy – Blockchain & AI Forum

Fatima, you submitted a timely question indeed. Central Bank Digital Currencies (CBDG) are a hot topic across the globe. Over 100 nations are exploring the idea, with some countries further along than others but no nation has yet to fully implement the project. Today, I’ll share the findings of the European Central Bank (ECB) relative to a possible ECB Digital Currency. In other words, a digital Euro. Before we jump into the findings, let’s start with what is the European Central Bank?

Unlike some organization, the European Central Bank name aptly describes the institution. Fatima, the ECB is the central bank of Europe! There are 20 member nations in the eurozone. Essentially, the ECB sets monetary policy in the eurozone, meaning its job is to ensure price stability, manage the money supply (the Euro), support economic development, manage foreign exchange operations, supervise banks for safety and soundness, and maintain the overall health of Europe’s financial system. A big job indeed! Time now to highlight the major points of the ECB digital currency (Euro) report.

https://www.ecb.europa.eu/euro/digital_euro/progress/html/ecb.deprp202406.en.html

INTRODUCTION. According to the ECB, the digital euro project aims is to ensure central bank money evolves alongside current payment preferences and trends, as well as to facilitate electronic payments everywhere in the euro area and strengthen Europe’s strategic autonomy. Back in 2021, the ECB announced it would conduct a two-year research initiative for the potential issuance of a digital euro. After two years of research, ECB decided to proceed and recently issued a progress report, which is summarized below.

GUARANTEEING DIGITAL EURO USER PRIVACY. Privacy and data protection are front and central, according to ECB. The design of the digital euro will include an offline functionality that purportedly offers users a cash-like level of privacy, both for person-to-person payments and payments in physical shops. For online digital euro payments, the digital euro would not be able to directly link transactions to specific individuals, claims the ECB. I’m not convinced, are you?

AN OFF-LINE EURO DIGITAL CURRENCY. ECB says it a digital euro would be available for both online and offline use and could be used for person-to-person payments as well as in physical shops. The offline functionality would enable payments to be made without an internet connection, for example at close range, in locations with limited network coverage, and in the event of power cuts. Sounds promising.

A DIGITAL EURO RULEBOOK. A digital euro needs rules, says the ECB. Therefore, a single set of rules, standards and procedures to standardize digital euro payments across the euro area will be developed. A common rulebook is necessary to ensure that digital euro payments are accepted throughout the euro area, just like cash payments, and work in a harmonized way. It will allow intermediaries to use its open standards to have immediate access to all markets beyond their domestic borders.

SELECTING PROVIDERS FOR DIGITAL EURO COMPONENTS. ECB signals it needs help! Thus, in January, the ECB notified vendors it would accept offers to develop the technology needed to implement a digital currency. Fintech contracting opportunities galore!

ENVIRONMENTAL ASPECT. Fatima, as a pro-environment person, you might be pleased to learn that the ECB has directed the bidders to incorporate measures that are environmentally friendly.

COMPENSATION MODEL, AKA, SHOW ME THE MONEY! According to the ECB, the euro digital currency would be based on acompensation model with fair economic incentives for all involved (e.g. consumers, merchants, banks). Would you expect the ECB to say anything else? Lol. In any case, the ECB says it will be guided by the following principles:

A digital euro would be free of charge for basic use and equally accessible in all euro area countries.
PSPs would charge merchant fees for providing digital euro-related services to offset the operational costs of distributing a digital euro, as is the case today for other digital means of payment.
The fees that merchants pay to PSPs for digital euro services would be subject to a cap to provide adequate safeguards against excessive charges.
The ECB would bear the issuance costs, as it does in the production of banknotes.

Fatima, it’s clear the ECB intends to issue a euro digital currency. The only question is when?

I end with this proverb from Croatia: “what a sober man thinks, a drunk man says.”

Until next time,

Yogi Nelson

Namaste Yogis. Welcome to the Blockchain & AI Forum, where your technology questions are answered! Here no question is too mundane. As a bonus, a proverb is also included. Today’s question, was submitted by Marcia in Palmdale, CA and she wants to know is China using its international aid to advance use of its artificial intelligence technology and gain market dominance in developing countries?

Marcia, you came to the right place. You ask a tough question, fortunately there is an organization headquartered in Santa Monica, CA that researches the subject and their name is RAND. RAND stands for Research and Development Corporation. Let’s understand RAND then answer your specific question.

RAND is a non-profit public policy research organization. RAND was established in 1948 with the intent of providing non-partisan policy research and analysis. Almost 100% of RAND’s 1,800 research staff members have either a Ph.D. or master’s degree. With seven offices spread across the globe in the USA, UK, and Australia, RAND has a worldwide audience. Last year RAND launched 800+ new research projects funded by more than 350 clients. RAND conducts policy research across 10 subjects, including national security. Bottom line–RAND is an impressive research organization consisting of brainy people. Holy nerds, Batman! Now let’s turn to the question asked by Marcia.

According to RAND, at $85B per year, China is the world leader in development finance. USA development finance falls a far second at only $45B per year. RAND says, Chinese tech companies can use this large government funding support to deploy state-of-the-art artificial intelligence (AI) tools in development contracts in recipient countries. And therefore, the AI exports facilitated by these arrangements are likely to bolster China’s growing global AI technology-related supply chains, trade flows, technology standards, and regulatory systems. In other words, when China provides development finance (aid) to Pakistan, for example, the contract with Pakistan, will include conditions that require Pakistan to use Chinese AI technology. Holy foot in the door, Batman!

Given the situation, RAND’s national security team was contracted (they don’t say by whom, but you can safety assume a branch of the U.S. government) to explore two questions:

1. How can China’s AI exports be systematically tracked and analyzed using reliable data sources?

2. What would promote a better understanding of the global landscape of China’s AI exports?

China does not participate in the International Aid Transparency Initiative. Hence, researchers tracked Chinese development finance by receiving countries. Researchers used OCED (Organization for Economic Cooperation and Development) data in their research. The dataset captured all official financial and in-kind commitments from China from 2000–2021 to developing countries.

First, let’s look at the published findings of the 33-page report. https://www.rand.org/pubs/research_reports/RRA2696-1.html followed by a few words regarding unpublished findings, as perhaps those too are interesting.

Reported Findings:

Researchers discovered 155 AI applications and AI infrastructure projects that were exported to 64 countries
The researchers used GIS to map their findings. Although Pakistan was the largest beneficiary, the map clearly shows most Chinese aid was dedicated to African nations.

Unreported Findings:

The report has six blank pages and no explanation for the blank pages is offered. The blank pages are not labeled, “Intentionally Left Blank”. The pages are simply blank with no explanation whatsoever. And no mention of what who paid for the report! Holy mystery, Batman!

I end with a proverb from Pakistan: The friend appears in hard times, not at big dinners.

Until next time,

Yogi Nelson

Tag: economy

Will Europe Adopt a Digital Euro? Key Insights from the ECB

IS CHINA USING ITS INTERNATIONAL AID TO PROMOTE ITS ARTIFICIAL INTELLIGENCE TECH AND GAIN MARKET DOMINANCE IN DEVELOPING COUNTRIES?