The Chinese national cryptocurrency is almost there. After a five-years journey, a Blockchain project has been successfully adopted.
August 12, 2019 | AtoZ Markets - During the meetings of the China Finance 40 Forum, the People’s Bank of China (PBoC) has announced that its national cryptocurrency is rather ready, and announcing the success of a prototype that adopts blockchain architecture after five years of research, as per the deputy director of the bank Mu Changchun.
The bank official said that the issuance of a digital currency in a big country like China, using a pure blockchain architecture, may not achieve the high concurrency performance required by retail. Therefore, it was finally decided that the People’s Bank should maintain technical neutrality and not presuppose technical routes, not necessarily relying on a certain technical route.
The architecture of the currency will be based on a two-tier operating system, which will improve accessibility and enhance adoption rates among the public, as the local news outlet Shanghai Securities quoted the deputy director during the meeting.
The crypto will be distributed to other banks under PBoC’s management
The single-tier operating system is the direct issuance of digital currency by the People's Bank of China. The People's Bank of China first converts digital currency to banks or other operating agencies, and then converts them to the public, which here results in what is named “a two-tier operating system”.
Mu Changchun explained that under the single-tiered delivery framework, the People's Bank directly faces the public to put digital currency. Compared with the commercial bank deposit currency, the former is better than the commercial bank deposit currency in the case of the People's Bank of China. The squeeze effect of commercial bank deposits affects the ability of commercial banks to lend and increase the dependence of commercial banks on the interbank market. With that being said, the capital price will be raised, the social financing cost will be increased, and the real economy will be damaged.
Expediting the issuance of a national digital currency interpret the country’s desire to compete with Facebook’s Libra coin. As AtoZ Markets reported on July 26, the Chinese giant technology Huawei suggested that China could compete with Facebook to gain market share by issuing a Chinese Libra coin before Facebook does even.
The CEO of the company, Ren Zhengfei, believes that issuing a Chinese national crypto will not be difficult to China, making it in parallel in value with the Facebook Libra coin.
"China can also issue such a currency by itself. Why wait for others to issue it? The power of a country is always stronger than an Internet company," Came Zhengfei’s answer to a question during a press conference in Italy on July 18.