Earlier, a senior central bank official said over the weekend, China’s sovereign digital coins are “essentially ready”. It was after the country pushed through with virtual asset plans that compete with the likes of Facebook’s Libra.
In addition, China is looking forward to launching an independent crypto coin that could be used as an alternative to cash.
According to local reports, the deputy director of the People’s Bank of China, Mu Changchun, told the China Finance 40 Forum in Heilongjiang that the bank had developed a prototype currency based on blockchain. But it has now switched to a technology-neutral position.
He indicated that a system based exclusively on blockchain would not be able to handle the high transaction volume necessary in China.
He also said that the currency is projected to be an alternative to cash. It is to be issued on a two-tier system by both the central bank and commercial financial institutions.
PBOC’s Dispersal Processes of The Digital Coins
The PBoC will be distributing the digital coins in a two-step process. It will be using commercial banks as intermediaries.
Meanwhile, the central bank does not believe the digital coins could be issued directly to persons.
The digital coins will be needing the support of yuan, or government-backed fiat, and the new issuance will not compete with the national currency.
So far, PBoC has not disclosed the exact type of blockchain they will be using but it believes the current solutions are not suitable to direct and mass distribution. It is mostly due to speed and capacity restrictions.
In the past, other central banks, including the ECB, have discovered the potential of Bitcoin (BTC) and blockchains to serve as alternative for traditional assets. But for now, central banks are committed to fiat.
India’s central bank has also declared it is working on a digital rupiah, but there is no deadline for the asset.
At the same time, Japan has also taken a lead in organizing and encouraging the use of cryptocurrencies, as it seeks to induce economic growth.