At the end of October last year, Chinese President Xi Jinping made a speech on blockchain technology, saying it is “vital” for the future development of the Chinese economy and pledging to speed up its deployment.
Since then, there has been much speculation over how blockchain may be used within China – from tracking the supply chain and improving efficiencies in local government to rolling out a central bank digital currency (CBDC).
So, a little over two months on, what’s the latest on China’s digital currency?
According to officials at the People’s Bank of China (PBoC) – China’s central bank – it is “progressing smoothly”.
China’s digital currency progress is on track
At the 2020 People’s Bank of China conference held in Beijing last week, officials discussed the state of the overall Chinese economy. They highlighted how, despite “the complex situation of rising domestic and foreign risk challenges”, the PBoC had maintained a “prudent monetary policy” and had achieved “remarkable results”.
They then began to look forward to the future, stating that “the development of fiat digital currencies is progressing smoothly”. They also pledged to continue to “steadily advance the development of legal digital currencies” in China.
No launch date was given for China’s digital currency and no mention of the word “cryptocurrency” was made at any point.
However, bank officials did note that high on their agenda was the need to “further standardise the management of large amounts of cash”. This is one of the main uses of placing payments onto a ledger and digitising the RMB, after all.
What might China’s CBDC be used for?
While many people in the space saw China’s announcement of a digital RMB as a knee-jerk reaction to Libra, the PBoC has actually been researching China’s digital currency since 2014.
It could potentially have many uses, from helping to crack down on its problematic money laundering issue to facilitating global trade.
It could also represent a giant step towards the dollarisation of the global financial system. As Christian Oertel, Global Marketing Manager at Chinese blockchain protocol Conflux Chain, told Coin Rivet in a previous article:
“On a bigger picture, it seems like another step towards dethroning Wall Street as the financial centre and the USD as the leading currency.”
Of course, one of the main advantages of China’s digital currency is that it can be used as a tool to control its people.
Senior Lecturer and Associate Professor of Economics, Policy, and International Business at Manchester Metropolitan University, Gavin Brown, told Coin Rivet:
“The ability to have similar technology in terms of speed and transparency but to do so in a state-controlled manner is an extremely powerful tool.”
PrimativeCrypto founding partner and authority on blockchain in China Dovey Wan pointed out that it’s not only China that stands to gain from digitising its monetary supply:
“Blockchain can be weaponized for ANY government to exploit taxation enforcement on its people.”
She went on to predict that state-backed digital currencies would become prolific throughout the next decade – and that this is not a good thing:
Only thing you need to know on ANY DIGITAL FIAT
It will enable:
😳 Programmable monetary policy
🤯Interactive fiscal policy
😨100% executable tax policyIt’s a giant 🕸️ trapping every move of your economic activity, which will sadly for sure going to happen in this decade 😭
— Dovey "Rug the fiat" Wan (hiring) (@DoveyWan) January 2, 2020
Final thoughts
Last week, we celebrated Bitcoin’s 11th birthday, a permissionless peer-to-peer payment system. But it seems the number one cryptocurrency turned the heads of governments and financial institutions not for its decentralisation or lack of intermediaries.
The fact that every payment can be tracked and “every move of your economic activity” trapped is far more appealing.
Not only will CBDCs and corporate coins mark the shape of crypto trends for the year ahead, but they look set to change our societies forever.
Featured image from the People’s Bank of China
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.