A senior official at the People's Bank of China has said that it is close to releasing the country's own sovereign cryptocurrency.
Speaking at a forum held in the northern Chinese province of Heilongjiang over the weekend, PBOC's deputy director of the payments department Mu Changchun said that the digital currency is "close to being out," although he did not provide a specific timeline.
Digital Currency To Replace Cash In Circulation
Mu said the digital currency would replace M0, or cash in circulation, and not M2, which would generate credit and affect monetary policy. The cryptocurrency would also support yuan's circulation and internalization.
Patents registered by the central bank showed that consumers and businesses would download a mobile wallet and swap yuan for the digital currency that they can use to make and receive payment.
Legitimate Users
The issuance of the digital currency will rely on a two-tier system in which the central bank and financial institutions will be legitimate users.
The central bank set up a research team in 2014 to explore the possibility of launching China's own digital currency with the intent to cut the costs of circulating traditional paper money, and boost control of money supply.
Will Not Rely Solely On Blockchain Technology
Mu also said that the digital currency would not rely solely on blockchain technology since the current blockchain technology, the framework behind cryptocurrencies like Bitcoin, would not be able to handle the volume of transactions in China.
Aims To Give China More Control Over Financial System
Unlike decentralized blockchain-based offerings, China's cryptocurrency aims to give Beijing more control over its financial system. The PBOC could track as money changes hands.
In a statement listing its work plan for the second half of 2019, PBOC said that it will "expedite the research of China's legal digital tender" and monitor the trends in the development of virtual currency locally and overseas.
"Something tells me that this is a completely different animal from what we know as cryptocurrencies," Mati Greenspan, senior market analyst at trading platform eToro said, according to CNBC.
