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A devoted team of the PBOC’s Digital Currency Research Lab is currently setting up its digital currency system in a restricted environment aiming to launch it before Facebook’s Libra enters the market.
After Facebook unveiled the white paper for its Libra Project in June, the People’s Bank of China (PBoC) got working. The PBoC is working at full speed trying to launch its digital currency into the market before Libra comes in. A devoted team of the central bank’s Digital Currency Research Lab is currently setting up the system. This team reportedly works in a restricted environment.
Reports suggest that the team of developers is working in a secret office away from the PBoC’s downtown Beijing headquarters. As we noted earlier, PBOC’s digital currency project has been in the pipeline for almost five years. The team working on it increased their speed after Libra was unveiled.
The developers shifted to a separate location since early summer to enable them to fully concentrate on the project. The work was expedited as the social media giant company revealed in June its vision for the Libra global cryptocurrency.
Notably, the Libra announcement rattles many governments worldwide. It even resulted in Congressional hearings in the US. Furthermore, it catalyzed bold new thinking by central bankers including Mark Carney of the Bank of England. A lot about the PBoC’s project is still unknown. Additionally, many conflicting accounts about the timetable and the degree of involvement by large Chinese companies have come up.
As we highlighted previously, new information coming from Paul Schulte suggested that Tencent, Alibaba, and Union Pay will get China’s digital currency first. Others that will receive this crypto include the Agricultural Bank of China, China Construction Bank, the Bank of China, and the Industrial and Commercial Bank of China.
When is the Launch?
According to a Sept. 4 report, “closed-loop testing” has started for the central bank digital currency (CBDC). The tests simulate payment scenarios that feature “some commercial and non-government institutions”. The project can launch earlier than Libra if all goes to plan. China Daily said in an earlier report that the bank may be targeting the first half of 2020 for its debut.
On August 27, Forbes reported that the launch may happen even as soon as this November. Several hours after the Forbes report, Tencent News and Sina said the timeline of the eight institutions were “inaccurate speculations.”
On the other hand, a second reliable source in touch with the PBoC’s CBDC efforts said that the organizations highlighted by Forbes have participated in the development of the CBDC initiative. But this source declined to say whether all or some of these institutions will get the state-backed digital Yuan after its launch.
A third source working in one of the highlighted institutions confirmed ongoing work in his organization but he does not know the actual contribution. He said that the details remain confidential since there is a non-disclosure agreement. However, none of the mentioned organizations have so far responded to requests for official comments.
The central bank may not roll out the CBDC nationwide on the first day after its launch. A Global Times publication said last week that the system may be launched in Shenzhen first for testing purposes. They choose Shenzhen because local companies like Tencent and state-owned financial institutions are researching technical infrastructures to support CBDC development.
The PBoC’s Digital Currency Research Lab recently set up an entity known as Shenzhen Fintech Research Institute. The Lab set it up with Shenzhen’s local government and financial regulator. They aim to develop and test fintech and digital currency-related projects. The institute went on a hiring spree searching for different technical experts including cryptography specialists and blockchain architects to be based in Beijing and Shenzhen.
The PBoC’s Digital Currency Research Lab has filed over 50 patent applications to describe the potential design of the state-backed digital Yuan. PBOC’s crypto is meant to complement China’s current fiat. The token aims to shield the bank from any impact that the crypto industry may have on the banking system in the future.