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“Cashless” by Richard Turrin is a must-read

We are already living in China’s fintech-led, digital-currency world…even if we don’t know it.



Richard Turrin wants you to know that you already live in the shadow of China’ fintech primacy. The West’s Big Tech companies, banks, and governments may not know it yet, because China’s capital markets are not open and its digital currency project still in test mode. He sees it as a harbinger.

Turrin’s self-published book, Cashless: China’s Digital Currency Revolution, is a vital read for anyone in finance or fintech. He is careful to frame his story in terms that outsiders will understand, making useful comparisons between China’s and America’s fintech and Big Tech stories.

The book covers the rise of electronic money and alternative credit, what he terms “Digital Payments 1.0”, notably the meteoric rise of Alipay and WeChat Pay. He details the thinking and design ideas behind the central bank’s digital yuan. And he tries to explain the government’s crackdown on Ant in late 2020, in the context of this history and in China’s aims for its digital currency.

There are other places to learn about China’s disastrous experience with peer-to-peer electronic marketplaces, the rise of digital payments, and the creation of super-apps. Turrin’s achievement is to put those in the context of what he views as the next big evolutionary step: central-bank digital currency.

His chapters on CBDC design and the specifics (including the murky bits) of China’s version, are especially helpful.

Turrin is aware that there is a lot of misinformation or speculation around China fintech, digital currencies, and, well, China in general. He brings an unusual but helpful background to tell this story: an ex-investment bank trader and IBM techie, and as an American living for the past ten years in Shanghai, he has seen firsthand the mindboggling changes that fintech has brought to society. And he is equipped to decipher and explain it to an international audience.

The structure of the book could have been streamlined: he takes too long to get to the meat of the subject, and sometimes we double back on ground already traveled. But these are quibbles: Turrin delivers clear arguments on an enormous topic, which is no easy feat.

Digital yuan v. dollar

As China is still pioneering its digital yuan, we can only speculate on its impact on the rest of the world and on the dollar’s position. Turrin offers his opinions. He thinks the digital yuan is a big deal, not as a head-on competitor to the dollar but as a mechanism to help China disentangle itself from dollar reliance.

This may be the book’s most interesting exploration, although it is also vulnerable to critique. Turrin believes China can lure foreign use of a digital yuan the same way that Alibaba and Tencent made domestic retail banks irrelevant to Chinese mobile users: by making people want to use it.

“The digital RMB wil use a game plan lifted straight out of internet commerce: entice users with free services, convenience, and good value,” he writes.

He tackles some of the reasons why the dollar is popular, such as its pricing for oil and other commodities, but in his telling, these boil down to a network effect, which can therefore be outplayed by a better customer experience.

There are two main reasons for foreigners to hold and use your currency: because you have exceptionally open capital markets, and because you run a trade deficit. Turrin does not address the question of balances of payments. He notes that China is on a path to liberalize its capital markets, but whether it actually does is definitely a “wait and see”. There’s every indication that China will continue its export-led economic growth strategy.

Turrin argues that technology is creating choices that didn’t exist before, in which outsiders will still want to use a Chinese CBDC without needing its capital account to be open. That, basically, digitalization is changing the rules. The argument may boil down to whether this is true at the margin, or if it leads to the kind of demand for yuan that makes it the first currency since the euro to gain traction against the dollar.

Citing the Chinese experience, he also predicts that China-style fintech will catch up elsewhere, and that Western banks and credit-card companies will be pressured as their Chinese brethren have. Turrin updates this by explaining how the introduction of CBDCs in general (not just China’s) will undermine their bread-and-butter revenue streams.

The rest of the world operates differently to China, of course. Alibaba and Tencent were granted banking licenses, which Big Tech companies can’t get, at least not in North America and Europe. The fast and gleeful adoption of techfin in China reflected its unique conditions. Capital markets and banking services in China were underdeveloped.

Turrin does an expert job of explaining why we should not be too hung up on the differences. The fundamental lessons of China’s fintech revolution are not as self-contained as it sometimes appears. He makes the case that the rest of the world has already begun copying Chinese innovations – if only sometimes acknowledging the debt. And that China’s digital currency is going to accelerate this transformation over the coming decade. DigFin highly recommends this book.

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