China’s Central Bank PBoC All Set to Launch Its digital Currency

The entry of big organizations like Facebook in the crypto market has given jitters to China. Looking to the growing use of crypto assets for instant cross-border settlements, China’s central bank - People’s Bank of China (PBoC) - is working actively on its central bank digital currency (CBDC) project.

According to the latest developments, China’s PBoC is nearing the launch of its native digital currency. On Monday, August 12, the Bloomberg publication reported the news. Citing a statement from Mu Changchun, deputy director of the payments unit at the People’s Bank of China (PBoC). Bloomberg notes that the researchers have been working for past one year for having a systems that ensures a seamless functioning of the digital yuan.

However, Mu says that the digital yuan won’t work on a blockchain platform but on a prototype similar to the blockchain architecture. He adds that in a huge country like the China, it is difficult to have a digital currency with a pure blockchain architecture.

Furthermore, the digital yuan will adopt a two-tier operating system that is in accordance to the nation’s “complex economy with a vast territory and a large population”. The PBoC will be on the top level while all other commercial banks will be at the secondary level.

Mu notes that such architecture will help to enhance the adoption of digital yuan among the public, improve accessibility, and promote innovation within other commercial entities. One of the unnamed PBoC executives said that the digital yuan will be best suitable for “small-scale retail high-frequency business scenarios.”

Last month, PBoC’s research bureau director Wang Xin said that there’s an imminent threat ahead if Facebook’s succeeds to launch its digital currency next year in 2020. He said: “If [Libra] is widely used for payments, cross-border payments in particular, would it be able to function like money and accordingly have a large influence on monetary policy, financial stability and the international monetary system?”

Although Facebook has officially announced that the Libra will be tied to several other fiat currencies, Wang Xin asserted that “If the digital currency is closely associated with the US dollar, it could create a scenario under which sovereign currencies would coexist with US dollar-centric digital currencies. But there would be in essence one boss, that is the US dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences”.