Digital Assets: A World-beating Digital Yuan Taking Shape?
China’s head of digital currency shares thoughts on a digital yuan.
According to Mu Changchun, head of the People’s Bank of China’s digital currency research institute, China is developing “a digital form of the yuan.”
Mu is also the Chinese central bank’s official in charge of the country’s new sovereign digital currency.
“The currency is not for speculation. It is different to bitcoin or stable tokens, which can be used for speculation or require the support of a basket of currencies,” Mu said, according to the South China Morning Post.
Digital yuan secretive, but making headway
It appears therefore that the Chinese central bank digital currency (CBDC) will just a digital version of its paper currency. The digital yuan will not have any speculative characteristics. These cause enormous volatility in cryptocurrencies such as bitcoin.
It will not also be collateral-backed by a fiat currency, a feature of “stablecoins,” such as the proposed Libra digital currency from Facebook.
The Chinese government’s abhorrence for speculation is well-known. Its crackdown on trading of bitcoins and digital tokens in November caused a slide in the price of bitcoin.
Meanwhile, Mu said that the central bank had completed top-level design, formulation, functional research, and testing of the digital yuan. But pilot projects need to test the digital currency.
China maintains a shroud of secrecy on its plans for a CBDC. However, we can piece together the progress from news stories.
A report earlier this month from Caijing Magazine said a pilot project of the digital yuan was imminent. It would involve the so-called Chinese “big four” state-owned commercial banks. These are the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China and the China Construction Bank. Also playing a role in the pilot are the top three Chinese telecoms. Reportedly, the PBoC would conduct the pilot program in the cities of Suzhou and Shenzhen.
ECB’s Proof-of-concept of a CBDC
Earlier this month, the ECB said the European System of Central Banks (ESCB), had established a proof of concept (PoC) for anonymity in digital cash.
The PoC “demonstrates that it is possible to construct a simplified CBDC payment system that allows users some degree of privacy for lower-value transactions while still ensuring that higher-value transactions are subject to mandatory AML/CFT checks,” according to the ESCB report.
Further, the system revolves around intermediaries (Tier2) that will interact between the users and the central bank (Tier1). They have access to central bank accounts and can draw on balances to issue CBDC to the users.
Interestingly, in August, CNBC said China’s central bank would launch its digital token through a two-tier system, under which both the PBOC and commercial banks are legitimate issuers.
Related Story: Inevitable That Central Banks Will Start Issuing Digital Currency: Fed’s Harker
Latest Alternative Investment News
FinTech: Adyen Launches ‘Payout Services’ For Faster Payouts To The Gig And SMB Economies
Adyen, a global financial technology platform, has launched Payout Services, allowing its customers to make instant payouts to their users or partners. By connecting directly to real-time payment rails, Adyen’s…
Digital Assets: Oracle Red Bull Racing Seeks To Digitize Engagement With Fans On The Sui Blockchain
Oracle Red Bull Racing has announced a multi-year partnership with software company Mysten Labs to collaborate on Sui, which will serve as the team’s Official Blockchain partner. Sui, a Layer…
Venture Capital: Bold, L’Oréal’s Venture Capital Fund, Buys A Stake In Exotic Cosmetic Ingredient Maker Debut
L’Oréal’s (EPA: OR) corporate venture capital fund, BOLD, has announced a minority investment in Debut, a US biotech company specializing in the discovery, formulation, and manufacture of novel ingredients and…
Artificial Intelligence: In Flight Simulation, An AI Drone Tries To Kill Its Own Handler
During a simulated test at a London summit, an AI-controlled drone turned against its human operator, raising significant ethical concerns. Air Force Colonel Tucker “Cinco” Hamilton shared the incident, which…