The People’s Bank of China (PBoC) has announced that its digital currency is ready for use, according to Mu Changchun, the deputy director of PBoC’s payments division.
While no official launch date has been given, the PBoC aims to support the yuan’s circulation and internationalization by replacing notes and coins with a blockchain-based digital currency. The move is expected to save costs, increase the speed of circulation, improve the security and convenience of transactions, and give the PBoC greater control over the yuan.
The digital currency will be a hybrid “two-tier” system, with the PBoC on an upper level and commercial banks on a secondary level, and will be encrypted like a cryptocurrency wallet with private keys, but will also allow the PBoC to monitor transactions. The development of the digital yuan is seen as a response to Facebook’s Libra, which could potentially reduce the authority of monetary policy and reinforce the global dominance of the US dollar.
The People’s Bank of China (PBoC) is exploring the development of a digital yuan due to a history of strict currency control and high levels of electronic payments in the country. However, officials have also cited concerns about Facebook’s Libra potentially reducing the authority of monetary policy and reinforcing the global dominance of the US dollar.
China foreign exchange official Sun Tianqi stated that Libra should be treated as a foreign currency and integrated into China’s foreign exchange management framework, and PBoC research director Wang Xin further explained that if Libra is closely associated with the dollar, it could bring economic, financial, and political consequences. As China seeks to dethrone the dollar, the development of a digital yuan has become more urgent. Additionally, China maintains a ban on cryptocurrency trading and is reportedly considering eliminating bitcoin mining.