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A senior official of China’s central bank announced at the China Finance 40 Group meeting that the country will soon roll out its central bank digital currency (CBDC).
It’s already widely known that China is very strict when talking about cryptocurrencies. However, it seems they have nothing against creating their own.
The People’s Bank of China (PBOC) announced that their digital currency dubbed CBDC is finally ready after five years they have been working on it. According to deputy director of the People’s Bank of China Payment and Settlement Division Mu Changchun, the currency will be using a more complex structure.
Changchun added that the POBC Digital Money Research Group made a prototype completely adopting the blockchain architecture. Changchun, however, tried to explain that the issuance of digital currency in a big country such as China, using a pure blockchain architecture, could not achieve the high concurrency performance required by retail.
Therefore, it was finally decided that the People’s Bank maintains technical neutrality without requiring technical routes.
The currency will depend on a two-tier split, with the People’s Bank on top and commercial banks below, apparently in order to help deal with the size of China’s economy and population. There are a few reasons why the two-tier operational structure is good for the complex community as China. As per Changchun, it will deal with difficulties concerning improving accessibility and increasing public willingness to use, more efficiently.
Secondly, the People’s Bank of China two-tier structure is good to adopt because it will get full chances to the resources, talents and technological advantages of commercial organizations, promote innovation, and compete for excellence.
Also, the two-tier operating system helps to resolve risks and avoid excessive concentration of risks.
And, last but not least is the fact that single-tier operational architecture could lead to financial disintegration.
However, the bank hasn’t mentioned the exact time when the currency would become available.
In spite of its mining ban, China is considered to be one of the most important players in the cryptocurrency market. Because of its volume, decisions, that the Chinese government does, have an influence on the entire industry. Be it as it may, Chinese cryptocurrency laws are pretty strict. Financial institutions are not allowed to use Bitcoin for trading. ICOs are illegal as well.
In January 2018, the People’s Bank of China, its top financial authority, advised that Bitcoin mining should be moderately suspended on miners through the influence of local authorities. Chinese media did everything to show cryptocurrencies as a tool for criminal actions that created a bad image that had badly manifested on the Chinese Bitcoin ban.
However, China has an inspiration to begin with the monetary format sooner than they wanted at first. The new attitude could create a more stable environment. It’s no wonder why the Chinese government wants to have a digital currency system it could control. Government executives have spent years and years trying to increase China’s independence from foreign tech, and this would be the next logical step.
At the same meeting, China UnionPay Chairman Shaofu Jun said that the goals of China’s digital currency will be hard to reach. While it could resolve some questions about cross-border transactions, long lag times and legacy inefficiencies, he said that “the lack of clear operational processes and a detailed regulatory framework across countries will be challenging to overcome.”