The People’s Bank of China (PBOC) recently announced at the China Finance 40 Forum meeting that the country would launch a central bank digital currency (CBDC).
Mr. Mu Changchun, Deputy Chief of Payments and Payments Department said that while blockchain has been applied to this digital currency, it will not fully rely on the blockchain network, and will also not be decentralized. This is in many ways similar to Facebook’s concept for Libra. China has cited the concerns of scalability on a fully decentralized blockchain network. Given the immense volumes of transactions that could possibly occur especially in the e-commerce industry, some adjustments to the development of this digital currency have to be made.
According to Mu, plans for the central bank’s currency went underway in 2014, and much research and development has gone into the project since then. The digital currency is “almost ready” now.
The PBOC’s digital currency will use a two-tier operational structure with China’s central bank at the top, and all global commercial banks operating on a lower level. They claim that this system is suitable for China and will ensure smooth transactions which will support China’s complex economy, vast territories and large population.
At the same meeting, Chairman of China UnionPay, Mr. Jun Shaofu said that the goal of the central bank’s digital currency will require more time to complete. Whether in matters of resolving cross-border transactions delays or the lack of transparent operational processes which will have to comply with the national regulatory framework, they will be facing a challenging road map.