Logo of Phnom Penh Post newspaper Phnom Penh Post - China finishes design and development of digital yuan currency

China finishes design and development of digital yuan currency

China finishes design and development of digital yuan currency

The People’s Bank of China (PBoC) has completed the design and development of an electronic legal currency, the digital yuan.

As Facebook’s virtual currency to be called Libra is increasingly facing restrictions, China is likely to lead the way in issuing digital currencies.

Phased introduction

“The design and development work have essentially been completed,” Chinese media quoted a senior official at the Chinese central bank as saying last week in a speech, As a next step, the bank plans to select areas for trial distribution and steadily introduce the system.

Last week, former PBoC governor Zhou Xiaochuan said in a speech that digital currencies have two goals – domestic retail settlements and international settlements.

“China will focus on retail payments and use the strategy as a basis for expanding its use,” Zhou said.

To reduce the impact of any problems, the bank is likely to take a step-by-step approach toward handling international payments. Digital yuan are unlikely to invite criticism if limited to the domestic market, in contrast with Libra.

Two-layer structure

According to PBoC governor Yi Gang’s remarks at a press conference and the transcripts of lectures by senior central bank officials, the digital yuan, or digital renminbi, is an electronic legal currency that has the same value as cash and will replace some notes and coins.

Digital yuan are to be supplied through a “two-layer structure” mediated by commercial banks. If the central bank provided digital yuan directly to users without going through commercial banks, financial intermediary functions such as bank financing would weaken, having a negative impact on the economy.

The digital currency will mimic the current flow of cash, in order not to undermine the effectiveness of China’s monetary policy and its banking system, which operates through commercial banks.

It is unknown which financial institutions will serve as the contact points for consumers, but likely candidates are the four major state-owned banks including the Industrial and Commercial Bank of China as well as Alibaba Group Holding Ltd and Tencent, which handle smartphone payments.

Users get digital yuan by exchanging cash with these institutions and put it in a digital wallet on their smartphone. Unlike smartphone payments, which have begun to spread in Japan, users will be able to make payments and remittances while shopping by lightly tapping their smartphones against each other, even if they do not have an internet connection. So-called controllable anonymity at the time of use will be secured, a senior PBoC official said.

Threat from Libra

The PBoC began studying digital currencies in 2014. It has more than 70 patents pending and has specialised research facilities. In this field, China stands out among the world’s central banks.

The PBoC’s sudden move toward digital currency is believed to have been prompted by concerns over Libra and speculation over currency hegemony.

Libra is known as a “stable coin” among cryptocurrency assets with a relatively stable price backed mainly by US dollars. Libra are issued by the Libra Association made up of private companies, and this structure conflicts with the idea that “currency is a symbol of national sovereignty”, Zhou said.

China apparently believes that the spread of Libra, which do not include yuan in its underlying assets, ahead of the spread of digital yuan could hamper the internationalisation of renminbi and create loopholes in regulations on capital outflow.

THE YOMIURI SHIMBUN (JAPAN)/ASIA NEWS NETWORK

MOST VIEWED

  • ‘Education’ a priority traffic-law penalty

    A top National Police official on June 21 neither rejected nor confirmed the authenticity of a leaked audio message, which has gone viral on social media, on a waiver of fines for a number of road traffic-related offences. General Him Yan, deputy National Police chief in

  • Volunteer scheme to foster ‘virtuous’ humanitarian spirit

    A senior education official said volunteer work contributes to solidarity and promotes a virtuous humanitarian spirit among the youth and communities. Serei Chumneas, undersecretary of state at the Ministry of Education, Youth and Sport, made the comment during the opening of a training programme called “

  • Chinese firms unveil preliminary results on metro, monorail for capital

    Minister of Public Works and Transport Sun Chanthol and representatives from China Road and Bridge Corp (CRBC) and its parent company, the state-owned China Communications Construction Co Ltd (CCCC), met on June 24 for talks on results of the firms’ preliminary study on a potential metro

  • ACLEDA, WU to enable global money transfers

    Cambodia's largest commercial bank by total assets ACLEDA Bank Plc and global money transfer firm Western Union (WU) have partnered to offer customers cross-border money transfers to 200 countries via “ACLEDA mobile” app. In Channy, president and group managing director of ACLEDA, said the June 22 agreement

  • Aeon, Micromax partner again for third mall

    AEON Mall (Cambodia) Co Ltd and a locally-owned Micromax Co Ltd have entered into a partnership agreement to develop fibre optic infrastructure for $200 million Aeon Mall 3, which is expected to be opened in 2023. The agreement was signed on June 20 between Masayuki Tsuboya, managing director of

  • Walmart plans to diversify stock of Cambodia goods

    Walmart Inc, the world’s biggest retailer, on June 22 reiterated recent plans to scale up and greatly diversify its purchases of Cambodian products, according to the labour ministry. This came during a virtual working meeting between Minister of Labour and Vocational Training Ith Samheng and