Since Facebook announced details of its Libra cryptocurrency project in mid June, China has viewed development of its digital coin with new urgency.
An official at China’s central bank has said the institution is nearing the launch of its digital currency.
Speaking at an event in China over the weekend, Mu Changchun, deputy director of the payments unit at the People’s Bank of China (PBoC), said its researchers have been hard at work since last year to complete the systems needed to support the digital yuan offering and that it is “close to being out.” The news was reported by Bloomberg on Monday.
Early in July, the former governor of the PBoC Zhou Xiaochuan said that Libra poses a threat to payments systems and national currencies.
As such, he argued the Chinese government should “make good preparations and make the Chinese yuan a stronger currency.” Zhou further suggested that “commercial entities” could be allowed to issue digital yuans, as Hong Kong allows with its dollar.
Around the same time, Wang Xin, head of the research bureau at the PBoC, said the central bank has been looking at the Libra situation with “high attention”, and could ramp up development of its own digital currency.
In his weekend comments, Mu reiterated that the PBoC’s digital currency would be a substitute for M0 – or coins and notes in circulation – not M2, which includes bank deposits. The digital currency would boost circulation of the yuan, including internationally, he added.
As previously reported, the large number of patents filed by the PBoC relating to its digital currency paint a picture of how it might work. They suggest the work addresses a technology that issues a digital currency, as well as provides a wallet that stores and transacts the asset in an “end-to-end” fashion.
The patents indicate the wallet would store a digital currency issued by the central bank or any authorized central entity that is encrypted like a cryptocurrency with private keys, offers multi-signature security and is held by users in a decentralized way.
At the latest count, there have been 52 patents filed under the name of the Digital Currency Research Lab of the PBoC, with the latest published in Oct. 9 2018, having been submitted on March 26. 2018.
China Will ‘Undoubtedly’ Pursue Digital Yuan, Central Bank Says
The notice is a summary of the 2020 National Currency Gold Silver and Security Work Video and Telephone Conference, convened on Friday by Yifei Fan, the central bank’s vice governor. One of the annual meeting’s goals was to lay out top priorities for the bank in this coming year.
While this was at least the third time a digitized yuan, or Digital Currency Electronic Payment (DCEP), was mentioned in the annual meeting, the unequivocal language used indicates a firmer stance on the project than before.
At the 2018 meeting, the bank said it would pursue the project “at a steady pace.” Last year, it said it would “accelerate” the process with a closer look at trends in cryptocurrency space at home and abroad and more strict supervision over online financing in 2019.
While the initiative is a few years old, it may have added impetus from coronavirus-related concerns about physical banknotes. At a Feb. 15 press conference, the central bank said it would disinfect and store cash for seven to 14 days before it takes it in, and put 600 billion yuan of new cash in circulation.
Researchers at the Bank for International Settlements (BIS) recently said the coronavirus pandemic could encourage digital payment adoption and inspire more talks about digital currencies among central banks across the world.
Along with the push for DCEP, the PBoC aims to reform the system to issue and withdraw cash and other issues to better manage cash circulation, according to the notice from the latest meeting,
Other priorities on the bank’s agenda include strengthening a crackdown on counterfeit money and testing programs to manage large quantities of cash.
Besides departments in the PBoC, officials from major state-owned commercial banks joined this meeting, according to the notice.