Very recently, the Chinese government announced that development of China’s own digital currency would be accelerated. Now, China’s central bank – the People’s Bank of China, has suggested that the new the digital currency is ready. The announcement was made by the bank’s deputy director for Payment and Settlement Division, Mu Changchun, during the China Finance Forty Yichun Forum which took place on the 10th of August.
The deputy director mentioned that it was first thought that the currency should use “pure blockchain architecture”. However, one problem with this is that the asset would not attain the specific concurrency performance required. So, the PBoC finally concluded that it would “not necessarily rely on a certain technical route.”
Changchun also touches on the operating system to be adopted. According to him, a two-tier system is the best way for China’s digital currency to cater to the large and dynamic needs and population of the country. He mentions that the main problem with a single-tier system – which means that the PBoC would directly issue the currency on its own – is that accessibility and adoption from the Chinese population might suffer. Changchun says that a two-tier system will also encourage innovation, properly disperse risks and “will lead to financial disintermediation.”
China Vs U.S.
The trade war between China and the United States is still ongoing and might be deteriorating. The recent downturn the war took is probably the reason China decided to speed up the process of development, to ensure a proper hedge against the dollar. Even though there’s no telling when the digital currency will be officially introduced, there’s more than enough reason to conclude that the move might be a way to avoid any dependence on the U.S. Dollar or as competition for the expected high adoption of Facebook’s Libra, if it does launch.