China to introduce Central Bank Digital Currency (CBDC)
The ‘People’s Bank of China (PBoC) which happens to be the country’s central bank, is reportedly about to launch its cryptocurrency. According to the bank, the currency will be called the “Central Bank Digital Currency (CDBC).” The digital currency will be rolled out in two tiers, which means that the central bank will not distribute the CBDC directly to the population. Mu Changchun, which is the deputy chief of the Payment and Settlement division at the PBoC, stated that the two layers would have the Central bank on top while the commercial banks will stay below.
What you need to know
China has been working on this Central Bank Digital Currency (CBDC) for a long time. Even though China is not a crypto-friendly country, however, it does support research into technologies such as blockchain technology. Since 2014, it has been researching and investing in the possibility of launching the Central Bank Digital Currency (CBDC). That was when the popularity of bitcoin (BTC) started to increase considerably.
With the way it is planned, the Central Bank Digital Currency (CBDC) is reported to be deployed within a two-tier system. This means that the cryptocurrency will not be available to the public directly via the central bank at the People’s Bank of China (PBoC). The central bank will make the cryptocurrency available to commercial banks and other financial institutions within the country. The Chinese citizens and residents can then get the cryptocurrency or digital money through these commercial banks or financial institutions.
The choice to use a two-layer system was made on the basis that China is a very diverse country. The quality of infrastructure within the country varies enormously. Also, the degree of economic development differs from area to area. Local authorities would, therefore, be better prepared for the conditions in their area.
One unique thing about the Central Bank Digital Currency is the fact that it does not entirely depend on the blockchain. Recall that China is not a full cryptocurrency-friendly country. They have argued that a lot of disorders is being created by cryptocurrency. Knowing that the Central Bank Digital Currency lacks the full reliance on the blockchain which is one of the characteristics of a cryptocurrency, I ‘don’t think it is okay to call it a cryptocurrency fully. We should stick with the name ”Digital currency”.
When will it be ready?
No words have been heard about when the actual usage of the Central Bank Digital Currency will be in place.
Do you think the Central Bank Digital Currency (CBDC) will partially replace the Chinese yuan in circulation?
Do you think the issuance of Central Bank Digital Currency by the central bank will have an impact on the economy of China?