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China Central Bank Ready with Crypto Prototype

Crypto Business World
published on Wed, 14 Aug 2019
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China Central Bank Ready with Crypto Prototype

People’s Bank of China (PBoC) said its blockchain-based solution for a digital asset backed by the government is ready, after years of research.

People’s Bank of China (PBoC) is ready with a prototype on a state-backed digital coin, to be distributed through commercial banks, reported Shanghai Securities News. "People's Bank digital currency can now be said to be ready,” said Mu Changchun, PBoC director of the Payment and Settlement division.

China has a mixed approach to digital assets, on the one hand attempting to curb the usage of coins and tokens to circumvent capital controls. Token sales, or ICOs, are also banned in mainland China as a risk to personal finance. But the government has also shown support for projects like TRON and NEO.

PBoC will distribute the digital asset in a two-step process, using commercial banks as intermediaries. The central bank does not believe the digital asset could be issued directly to persons. The digital asset will be backed by yuan, or government-backed fiat, and the new issuance will not compete with the national currency.

So far, PBoC has not detailed the exact type of blockchain to be used, but it believes current solutions are not suitable to direct and mass distribution, mostly due to speed and capacity restrictions. In the past, other central banks, including the ECB, have explored the potential of Bitcoin (BTC) and blockchains to serve in lieu of traditional assets. But for now, central banks are sticking to fiat.

India’s central bank has also announced it is working on a digital rupiah, but there is no deadline for the asset. At the same time, India has been skeptical of private, international digital asset Libra, proposed by Facebook.

China’s new asset will not have an impact on monetary policy, commented Mu, and will not generate an alternative economy. The announcement on a new form of the yuan arrives at a time when China has been called for opening a trade war on the US by lowering the exchange rate of the yuan.