China’s digital currency approach will favor international and national retail payment systems, said a former senior official.
27 November, 2019 | AtoZ Markets – Zhou Xiaochuan is the chairman of the China Financial Association and former governor of PBoC (People’s Bank of China). He presented two types of implementation of central bank digital currencies (CBDC) at the Caixin Hengqin Forum 2019. Local publication Caixin reported it on November 26.
China Digital Currency Retail Payment Systems
According to Zhou, there are two goals for international digital currencies. The first, which is also what China is considering, is to develop digital payment and its use for the local system in the country. And the other goal is cross-border payment for international financial institutions. These two goals will require different technical designs for digital yuan. And China could expand its capabilities once it has implemented the digital payment function in retail.
Zhou said China is a challenging environment to test the new digital currency. And a country with a smaller population could be better since the currency circulation cycle is shorter. In case of a problem, it will be easier to steer the boat in another direction.
Zhou is the formal head of the Chinese central bank. But his speech could be an important message from the authorities. That is how the bank will launch the digital currency DCEP (Digital Currency, Electronic Payment).
The Chinese government has traditionally sent soft signals from former top officials before making official announcements, said Mable Jiang. He is a partner at Nirvana Capital, a Beijing-based venture capital firm specializing in financial technologies.
China’s CBDC Project
“I think this is an essential signal that China would start pushing the use of retail DECP in some economies that fit Mr. Zhou’s description of a smaller population and a good infrastructure. Internet, “Jiang said.
This news also comes after China completed its CBDC project in August 2019. Subsequently, the PBoC said the bank did not have a specific launch date for its digital currency. The financial institution needed time to study and evaluate the initiative. At the end of October, an executive at Chinese economics said he believes the PBoC will be the first to launch its digital currency successfully.
While continuing to develop its digital yuan initiative, PBoC has recently tightened its crackdown on cryptocurrency-related operations in the country. In a November 21 statement, the bank warned that it was acting against entities involved in the cryptocurrencies trade like Bitcoin (BTC). That hits the crypto markets hard.
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