China’s state digital currency is coming. | Source: Shutterstock
China’s incipient digital currency will apparently “bear similarities” to Facebook’s own proposed cryptocurrency and is intended to protect China’s ‘monetary sovereignty’, according to a superior within China’s central bank.
Relaying the several key attributes of China’s new central bank digital currency (CBDC) Mu Changchun, deputy director of the People’s Bank of China’s payments department, elaborated upon the emerging “cryptocurrency”. According to Reuters, Mu noted that the CBDC would encompass some of the characteristics of Facebook’s Libra. These include interoperability across major Chinese payment platforms such as the Alibaba-subsidized, Alipay, as well as WeChat. The CBDCs themselves will allegedly be as safe as bank-issued fiat and have the benefit of working without any connection to the internet.
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The transcript of a lecture given this week, denotes Mu positing the reason behind China’s creation of the cryptocurrency:
“Why is the central bank still doing such a digital currency today when electronic payment methods are so developed? It is to protect our monetary sovereignty and legal currency status. We need to plan ahead for a rainy day.”
Mu also remarked that the CBDC would attempt to balance between anonymity and anti-money laundering prevention; stating that the cryptocurrency would bear similarities to Libra, but would not copy it.
First Cryptocurrency to the Finish Line
These comparisons to Facebook’s project are perhaps unsurprising. China has been exploring the possibility of a sovereign digital currency since 2014, attempting to minimize the cost of monetary circulation. However, it was the apparent threat levied by Libra, which truly got the ball rolling. Binance Research recently suggested that China’s rush to market is due to the potential menace of Libra on capital outflow; something which continues to endanger China’s economy.
A Prototype of China’s proposed CBDC | Sources: Digital Currency Research Institute of PBoC, Binance Research
The Binance researchers also delved into concerns involving individual financial privacy. According to the analysis, every transaction will record owner information; with new data gathered as the currency circulates:
Unlike privacy coins, central authorities would be able to gather information. Eventually, identities would likely be tied to respective individual wallets, hence making it fully non-anonymous, unlike Bitcoin.
A recent report by Forbes noted that China was about beat Facebook to the punch, launching as early as November 11. However, this claim has since been debunked by the PBoC.
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