China’s central bank has revealed it will soon launch its own state-backed cryptocurrency following five years of research.
A senior official at the People’s Bank of China said the cryptocurrency was “close to being out” at an event held by China Finance 40 Forum, according to separate reports in Reuters and Bloomberg, though failed to provide a specific date for its unveiling.
Mu Changchun, deputy director of the China’s central bank, said the new currency would rely on a “two-tier” system that would allow both the PBC and financial institutions to issue the currency.
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China has traditionally been resistant to decentralised cryptocurrencies like bitcoin, despite the country being home to some of the world’s largest cryptocurrency mining facilities.
But while China pushes back on bitcoin adoption, the PBC has been researching the potential of its own cryptocurrency since 2014.
Industry experts say other global economies risk being left behind if they do not develop their own blockchain-based digital currency and continue to stifle cryptocurrency adoption.
“It’s clear that China understands the opportunity cost of missing out on cryptocurrency growth,” Don Guo, CEO of Broctagon Fintech Group, told The Independent.
“Digital currencies are coming into the mainstream and international competition is heating up… China is well positioned to get ahead of the game and take up a leading position in one of the key asset classes of the future. Although a certain level of regulatory scrutiny is wise, other countries should consider taking China’s lead.”
Few details about China’s cryptocurrency have been revealed, though the new system could theoretically reduce the costs of circulating traditional paper currency, as well as speed up and add security to digital transactions.
If the new currency is to be rolled out on any significant scale, it will need to be able to cope with massive transaction volumes.
The new currency may also risk leaving out large swathes of China’s 1.4 billion population, with only around half of the country owning smartphones, which will presumably support the digital wallets required to store and spend the cryptocurrency.
Patents registered by the PBC reveal plans for a mobile wallet that would allow users to swap yuan for cryptocurrency.
Systems described in the patents suggest the cryptocurrency could give China’s central bank much greater control of the money supply, as well as track all payments made across the network.