Mu Changchun, the deputy director of the payments unit at the People’s Bank of China, said its development team had been working extensively on developing the infrastructure for the rollout. The goal is to allow transactions to take place in a cryptocurrency equivalent to fiat currency.
Using the same technology that powers cryptocurrencies like bitcoin, the central bank hopes to reduce the costs of payments. The superior technology of DLT could also help introduce significant efficiencies.
The process has reportedly been sped up as a response to announcements around Facebook’s Libra cryptocurrency. The Chinese central bank reportedly considers Libra a threat to its own plans to launch a digital currency.
Back in July, the former governor of the Chinese central bank, Zhou Xiaochuan, described Libra as a threat to national currencies and the global payments infrastructure. Reports have since emerged that the bank has accelerated efforts in light of Facebook’s progress.
Earlier this week, Mu Changchun said the cryptocurrency would act as a proxy for notes and cash. However, it would not cover bank deposits – so-called M0 money, vs. M2.
He is reported to have said that the move towards a central bank issued cryptocurrency would help boost international supplies and flows of yuan. Mu Changchun also said it would make payments more efficient and effective, both at home and globally.
To date, some 52 patents have been filed by the Digital Currency Research Lab at the People’s Bank of China. This provides some idea as to how the cryptocurrency might work in practice.
The move positions China to become the first major global economy to embrace cryptocurrency technology to such an extent. The rollout could then see mainstream usage of the cryptocurrency as a workable alternative to traditional fiat coins and notes.
Users will be able to store cryptocurrency in decentralised wallets, with multi-sig protection. That would make it similar to the technologies used for storing and verifying ownership on public cryptocurrencies like bitcoin.
China is one of the first to move so quickly on its plans. However, there’s little doubt other national central banks will be monitoring their progress closely.