A senior official at China’s central bank announced at the China Finance 40 Group meeting today that the country will soon roll out its central bank digital currency (CBDC.) The People’s Bank of China has revealed that its digital currency “can now said to be ready” after five years of work. Don’t expect it to mimic crypto, however. According to payments Deputy Chief Mu Changchun, it’ll use a more complex structure.
Mu Changchun claims that the People’s Bank of China has access to a prototypical version of the digital currency and that the PBOC has fully adopted and integrated the use of blockchain technology into its infrastructure. He also revealed that the CBDC will not rely upon an entirely “pure” blockchain technology, citing difficulties in scale.
In particular, he claimed that it was difficult to achieve a high level of performance for retail use in a country the size of China if the digital currency relied solely upon a blockchain architecture. Instead, CBDC will rely upon a hybrid technology that will offer “technical neutrality” on behalf of the central bank, but not necessarily rely upon the full “technical route” of blockchain.
The CBDC will employ a two-tier operational structure, per Changchun:
“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 the acceptance of digital currency.”
A two-tier system is preferable due to China’s complex economy, vast territory and large population. “From the perspective of improving accessibility and increasing public willingness to use, a two-tier operational framework should be adopted to deal with this difficulty,” Changchun said. He also welcomed the resources, talent and innovation capabilities of commercial businesses who will partner with the PBOC to roll out the currency. Finally, this system will help avoid concentration of risk and financial disintermediation.