China is one step closer to issuing the world’s first government-backed digital currency, according to US media. Li Wei, director of the technology department at the Chinese Bank of China, said on October 28th that commercial banks should make more use of blockchain technology, which is the basis of digital currencies, according to Fortune magazine’s website on October 29.
Researchers at the People’s Bank of China have been exploring the possibility of issuing digital currencies since 2014, but the government has also been keeping a close eye on privately developed cryptocurrencies, the report said.
In addition to the statements from bank officials, China’s legislature recently passed a password law that will take effect on January 1 next year, in an effort to support blockchain technology research and strengthen government oversight of such research.
“I think the People’s Bank of China is likely to be one of the first in the world to issue digital currencies, ” said Li Chen, an assistant professor of China at the Chinese University in Hong Kong. ”
The report notes that while this is the same as Facebook’s proposed digital currency Libra, which is based on blockchain technology, they are not the same thing. Among other things, China’s digital currency will be overseen by the central bank, which will act as the sole regulator of the currency, for example, with the power to freeze transactions.
Since Libra is a private currency, it is not regulated by the central bank. This could raise concerns about money laundering, tax evasion and “grey zone transactions,” Mr. Li said.
Mark Mahaney and Zachary Schwartzman, analysts at RBC Capital Markets, said in a report on October 15 that the Central Bank of China accelerated the pace of developing its own cryptocurrencies after Facebook announced the launch of libras in June, Fortune reported on Oct. 16. “If U.S. regulators ultimately reject Libra and decide not to draft regulations to encourage u.S. cryptocurrency innovation, the PBoC’s digital currency could gain a strategic advantage and become a de facto global digital currency among emerging economies,” they wrote. ”
According to two analysts, china’s communication and payment applications, such as Alipay and WeChat, will serve as a channel for adopting China’s digital currency because they “provide consumers with the best opportunity to use digital wallets”.