China to Test Central Bank Digital Currency with Major Banks

China’s Central Bank enters a new phase of its tests for a digital currency payment system. The central bank announced that it had completed the preliminary tests. And it turned to the creation of a testing ground with the help of big Chinese companies and banks.

09 December, 2019 | AtoZ Markets – The People’s Bank of China has been testing its crypto-active payment system since 2014 but has refrained from officially launching it. Now, a report suggests that the central bank could launch a real-world test of digital currency in the cities of Shenzhen and Suzhou. It integrates large-scale local commercial banks and local telecommunications giants like Huawei.

China Test Central Bank Digital Currency

The current test will be a small-scale operation that will continue until the end of the year, reported Caijing magazine. Subsequently, 2020 will see further testing to establish the best model for a yuan-pegged digital coin.

The tests will be conducted according to a “horse race” model, with each commercial bank offering a different payment model. However, the best can be used to launch crypto yuan, explained a person close to the tests.

The real situation with the digital yuan has not reached the promised launch “end of November.” It turned out to be an excessive rumor. Yet China is setting a precedent that could impact both the crypto space and the global financial system.

China’s CBDC can create a new way of money, potentially bypassing US sanctions and going beyond the control of banks. This could lead to funding schemes like North Korea, commented Paul Vigna at the Wall Street Journal.

Read More: South Korea to Tax Cryptocurrency Transactions in 2020

CBDC to Potentially Replace Liquid Money for Private Users

So far, the PBOC is the first central bank to conduct detailed testing of its digital currency using technology similar to Bitcoin. But it is also supported by the state. The European Central Bank, under the presidency of Christine Lagarde, has admitted the possibility of creating a digital euro. But it is not without advanced technical tests.

Fan Yifei, Deputy Governor of the PBOC, said the digital payment system aims to replace M0 or the cash in circulation. The central bank is already using an all-digital ledger for broad money and will retain the old system to transfer funds to commercial banks. But everyday money can be replaced by a technologically advanced version.

The use of mobile payments and the dominance of WeChat and AliPay as Fintech solutions also suggest the need for a safer form of digital currency. The PBOC does not have a deadline to launch crypto yuan, recalled the governor of the bank, Yi Gang. There will, however, be a series of tests to select the best model for supplying digital currency.

Think we missed something? Let us know in the comments section below.

Share Your Opinion, Write a Comment