China’s Cryptocurrency is “Ready” – Aims to Replace Cash
According to reports by Bloomberg, the People’s Bank of China, PBOC, is close to releasing its digital currency that would replace money in circulation. This is potentially a reaction to Facebook’s planned release of its digital currency, Libra, but Chinese authorities claim that their digital currency has been in development for five years.
Chinese Digital Currency Under Development
The PBOC’s digital currency is a project that has been going on for more than four years now. The research was first carried out to determine the impact of digital currency in the republic. The planned digital is now “close to being out.” Mu Changchun, an official at one of PBOC’s departments, mentioned this during a China Finance 40 Forum held during the weekend of Aug 10.
The digital currency is reported to have tested blockchain technology as its foundation; however, some challenges prompted the research team to consider more than one technical route in the implementation of the digital currency.
During the research and development phase, it was also discovered that a two-tier operating system would best suit the Chinese economy. A single-tier operating system would see the PBOC issue digital currency directly, whereas the two-tier system would have PBOC covert digital currency to the bank and other agencies and then convert the digital currency to the public.
The two-tier system prevailed due to the complications of the Chinese economy.
Facebooks Libra Prompts A Rushed Release?
Facebook’s announcement of Libra caught many by surprise. Governments are not prepared for the possible implications Libra may have on economies; hence, the calls for Facebook to stop the development of Libra. Digital currencies could change the financial situation of various economies, a risk which many governments are unwilling to take and have been vocal about it.
“Libra must be seen as a foreign currency and be put under China’s framework of forex management,”
Sun Tianqi, an official from China’s State Administration of Foreign Exchange mentioned at the same forum (China Finance 40 Forum). These sentiments are shared by many governments, primarily because Libra may lack control from world governing bodies.
Facebook’s announcement likely prompted the research and development team responsible for PBOC’s cryptocurrency to fast-track their process to have a working digital currency by the time Libra is released. By implementing their digital currency, especially if it is done before Libra is released; the PBOC would have given Chinese citizens a working digital currency hence decreasing the appeal for other digital currencies.
Further, because of the control that the Chinese government wants to have over its people, the PBOC digital currency will act as an effective alternative to any digital currency, its citizens may demand. It would also mean that the digital currency would be under the control of the state as opposed to a foreign-controlled or decentralized digital currency.
Can Decentralized Cryptocurrencies Exist In China?
The issue of control is very sensitive in China. Social platforms from foreign countries are banned in the republic with homegrown options provided by the government. The government wants to control the views and perceptions of its citizens.
It will not come as a surprise if any decentralized digital currency fails to thrive in the region. With the development of PBOC’s digital currency, it is all but confirmed that only government-backed or supported digital currencies will survive in the People’s Republic of China.
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