The People’s Bank of China (PBoC) confirmed its efforts to establish its own digital currency is close to fruition following years of development. PBoC deputy director, Mu Changchun, confirmed the digital currency is “said to be ready” at the China Finance 40 Forum and was reported by local news site Shanghai Securities News.
Details on the Digital Currency
The central bank affirmed that the currency has not been developed to replace their current cash currency in circulation merely add a further option for people to use. The patents filed by the PBoC outline that merchants and consumers would swap local currency Yuan for digital money using a mobile wallet which would be utilized to make and receive payments. The digital currency is not classed however as cryptocurrency, as it does not run on a decentralized blockchain. The currency will be centrally managed by the PBoC, who will be able to monitor transactions, a move which they hope will help filter out money laundering schemes.
Establishing a Two-Tier System
Mu Changchun outlined that due to the “complex economy with a vast territory and a large population” that China has, it would be extremely difficult to use blockchain architecture for the digital currency. As China’s retailers require high throughput, the digital currency will adopt a two-tier operating system. The PBoC will operate on an upper level and commercial banks on a secondary level, a system which Mu outlined will improve accessibility and enhance adoption rates amongst the public.
The PBoC gave no official dates as to when they will look to launch the currency, however it is reported that the release will be a gradual one to give the public the opportunity to familiarize themselves with the currency. With Facebook’s Libra project announcement, it is believed that the PBoC brought their plans forward.
Dave Chapman, executive director at BC Technology Group Ltd., explained:
“It is without doubt that with the announcement of Libra, governments, regulators and central banks around the world have had to expedite their plans and approach to digital assets. They have to consider the possibility that non-government issued currencies could dramatically disrupt finance and payments.”