Daily Management Review

China to create its own digital currency


02/24/2017


After organization of a special study group in 2014, People's Bank of China has made tentative steps towards the introduction of its own prototype cryptocurrency.



Having its own analog of Bitcoin, the Chinese regulator will make yet another step closer to becoming the first central bank in the world, which will issue its own digital money to buy everything from food to car.

For those who are already making transactions via their laptops or smartphones, cryptocurrency of PBOC will probably look similar to the existing payment methods, such as Alipay or WeChat.

However, sellers will face major changes, as they will receive digital payments directly from customers. The operating costs are supposed to be reduced due to lack of intermediaries in the process of payment of goods or services.

At the same time, while the Central Bank of China intends to introduce its own cryptocurrency, watchdogs are closely studying Bitcoin and other private digital currency. Chinese authorities do not want to burst a Bitcoin bubble. Historically, all the currency in the country is issued by the state rather than private players, so the government does not want to cede the market to companies that are not controlled by the state.

Residents of China are actively using online payment calculation for all operations. They often scan QR-codes with their smartphones to buy even a small coke, rather than putting coins in vending machines.

These developments are challenging status of the People's Bank of China as a financial controller in the field of physical and digital money. That is why the central Bank of China has decided to follow a proven strategy: if you cannot beat it, join it.

Duan XinXing, vice-president of the Beijing OKCoin - one of the largest bitcoin trade sites in the country – says that receiving more accurate information on volume of bank lending, cash flows and origin of loans is the key to fight against money laundering and adoption of more effective monetary and lending policy.

Issuance of state digital currency will give the People's Bank of China a lever to control risks in the financial system and track transactions across the entire economy, the expert added.

source: bloomberg.com






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