By
Temitope Olatunji
March 28th, 2024
People’s Bank of China is said to be preparing for issuing its own cryptocurrency in the coming days. According to sources, the first beneficiaries of China’s CB/DC are Alibaba, Tencent, Union Pay, and others.
New information came yesterday from Paul Schulte, who worked as global head of financial strategy for China Construction Bank until 2012 and who now claims China’s central bank will launch a state-backed cryptocurrency and issue it to seven institutions in the coming months. Those seven institutions who will receive cryptocurrency are: China Construction Bank, the Industrial and Commercial Bank of China, the Bank of China, the Agricultural Bank of China, Alibaba, Tencent, and Union Pay.
Another source, allegedly involved in the development of the cryptocurrency, called DC/EP (Digital Currency/Electronic Payments), confirmed that the seven institutions would be receiving the new asset, adding that there might be an eighth institution among the first tier as well.
The source, who previously worked for the Chinese government, said that the technology behind the cryptocurrency has been ready since last year and that the launching is expected to happen November 11, China’s busiest shopping day, known as Singles Day.
The recipients will be expected to distribute the cryptocurrency to 1.3 billion Chinese citizens and others doing business in the renminbi, China’s fiat currency. The source added that the central bank hopes the currency will become available in the U.S. as the rest of the Western world through relationships with matching banks.
Shulte thinks that even though there are a lot of plans to move from U.S dollar as the global reserve currency, what differentiates China’s DC/EP apart from, for example, Libra or U.K.’s “synthetic hegemonic currency” (SHC), is the fact the Chinese cryptocurrency is ready to launch.
We already wrote of how the currency will depend on a two-tier split, with the People’s Bank of China (PBOC) on top and commercial banks below, apparently in order to help deal with the size of China’s economy and population. This strategy lines up with some statements made by Mu Changchun, deputy director of the Paying Division of the PBOC and the new head of China’s cryptocurrency research lab.
At the beginning of the month, Mu said that the two-tiered system is designed to “curb public demand for other cryptographic assets, consolidate China’s national currency sovereignty, ensure that the central bank maintains control over monetary policy affecting the currency, increase the likelihood of people using the currency, distribute the risk of having all the authority directly in the hands of the central bank and encourage competition between the organizations that receive the cryptocurrency”.
He added that this dual delivery system is suitable for their national conditions because it can both use existing resources to mobilize the enthusiasm of commercial banks and improve the acceptance of the digital currency at the same time.
Comparing DC/EP with Libra, Mu said that the key difference is that while Libra is being designed to handle 1,000 transactions per second, the DC/EP was designed to handle 300,000 transactions per second. Just to mention that during last year’s Singles Day the peak volume of all transactions in China was 92,771 transactions per second.
“The central bank’s digital currency can be circulated as easily as cash. Which is conducive to the circulation and internationalization of the renminbi.”
Charles Liu, chairman of HAO International, a private equity firm investing over $700 million in Chinese growth companies seems to be a great believer in adoption of China’s cryptocurrency, and claims he is an angel investor in “the first blockchain company to be able to sign an official contract with the People’s Bank” of China.
He supported Mu’s comments and said that in addition to being a more efficient way to track money laundering, bribery, and other transactions, the cryptocurrency will give banks increased confidence in the creditworthiness of borrowers, let merchants receive payments instantly and lower transaction fees.
“What will facilitate commercial transactions and enhance efficiency, the central government decides and they go ahead and do it. China’s strategic plan is to integrate more closely with the rest of the world. Cryptocurrency is just one of the means to have a more internationalized renminbi. It’s all strategic. It’s all long term.”
