China and cryptocurrencies may not be a match made in heaven, but within a week, based on statements from two different officials, China has gone from pushing up its timetable for a Central Bank Digital Currency (CBDC) to actually being “ready to launch.” Despite its national ban on nearly all things crypto, China’s central bank has been working diligently for the past five years on developing a CBDC. As announced, the currency system may be a “hybrid” of blockchain technology and other operating techniques, primarily to increase its scalability and efficiency at the point of sale.
Earlier last week, reports noted: “Wang Xin, the research director of China’s central bank, made it known at a recent conference that Facebook and its Project Libra have changed the collective thinking behind their current development efforts. He noted that regulators across the globe are suddenly concerned over what a private cryptocurrency run by a private corporation could do to their domestic consumers and that China needs to rush up its timetable: “We will keep a close eye on the new global digital currency. We had an early start… but lots of work is needed to consolidate our lead.””
The new news is that on last Saturday, Mu ChangChun, Deputy Chief in the Payment and Settlement Division of the People’s Bank of China, announced at the China Finance 40 Group meeting that the country is preparing to roll out its own version of a CBDC. Per Changchun: “People’s Bank digital currency can now be said to be ready.”
Mr. Changchun went on to explain that the CBDC will rely upon a two-tier operational structure: “The People’s Bank of China is the upper level and the commercial banks are the second level. This dual delivery system is suitable for our national conditions. It can use existing resources to mobilize the enthusiasm of commercial banks and smoothly improve acceptance of digital currency.”
Due to the complexity of the economy, the vast distances between borders, and the size of the population, a two-tiered system seemed to be the only way out of a difficult situation. They already anticipate that accessibility and a willingness to use the national system will require a much broader approach. In order to achieve its goal, however, the PBOC will be partnering with a variety of commercial businesses to access a broader talent pool and the resources necessary to achieve success.
Not all attendees at the meeting were as confident as Mr. Changchun. Shaofu Jun, the chairman of China’s UnionPay card system, emphasized the difficulty of such a grand roll out. He noted that cross-border efficiencies were one area where blockchain technology could excel, but that domestic challenges will abound due to a lack of “clear operational processes and a detailed regulatory framework” across the country.
As other reports have noted, China was on a race to get ahead of the potential of a Facebook Libra Coin concept. One observer noted: “China does have a motivation to roll out the monetary format sooner than later. The nation has reportedly argued that cryptocurrency creates disorder, with speculators selling off regular currency and buying up the virtual kind. This new approach might create stability. It's also no shock that the Chinese government would want a digital currency system it could control. Officials have spent years trying to increase China's independence from foreign tech, and this would be the next logical step.”