A short two weeks since Tunisia announced plans to move their digital currency, the eDinar, to Blockchain technology, the People’s Bank of China, China’s central bank, wants to launch its own digital currencies to cut the costs of circulating traditional paper money and boost policymakers’ control of money supply. And the maturing of Blockchain technology is part of the reason they are moving forward.
At the Digital Currency Symposium held in Beijing on January 20, 2016, digital currency experts from the People’s Bank of China, Citibank and Deloitte and Touche engaged in a discussion and exchange regarding several topics including overall frameworks for the issuance of digital currency, national digital currency in the context of current currency developments and state-issued cryptocurrency. People’s Bank of China Governor Zhou Xiaochuan attended the meeting, with People’s Bank of China Deputy Governor Fan Yifei chairing the meeting. The meeting was also attended by experts from related research institutions, major financial institutions and advisory bodies.
The meeting pointed out that as information technology has developed and technologies such as the mobile Internet, trusted and controlled cloud computation, secure terminal storage and the blockchain have matured, significant changes in payment methods have occurred worldwide and the development of digital currencies presents both opportunities and challenges to the issuance of currency by central banks.
The People’s Bank of China has taken this subject seriously, establishing a special research team as early as 2014 and further bolstering said team in the beginning of 2015. The team has since conducted in-depth research on various subjects, including frameworks for the issuance of digital currency and related business operations, key digital currency technologies, environments for the issuance and circulation of digital currencies, legal issues faced by digital currencies, the effects of digital currencies on the economic and financial system, the relationship between fiat digital currency and privately issued digital currency and international experience in the issuance of digital currencies.
The minutes from the meeting stated that under China’s new economic policies, the exploration of the issuance of digital currency by the central bank has positive practical significance and far-reaching historical significance. The issuance of digital currency can reduce the significant costs of issuing and circulating traditional currencies, improve the convenience and transparency of economic transactions, reduce money laundering, tax evasion and other criminal acts, enhance the central bank’s control of over the money supply and currency circulation, better support economic and social development and aid in extending financial services to under-served populations.
Going forward, the establishment of a system for issuing and circulating a digital currency will help China build an entirely new financial infrastructure, further improve China’s payment systems, improve payment and settlement efficiency and promote increased overall economic quality and efficiency.
The consensus of the meeting was to urge the People’s Bank of China’s digital currency research team to actively incorporate important results and practical experience from digital currency research performed within China and abroad as well as continue to advance their work on the basis of their preliminary work, establish more effective organizational safeguard mechanisms, further clarify the strategic objectives of central bank digital currency issuance, thoroughly research key technologies, research various applications for digital currency and strive to introduce a digital currency issued by the central bank as soon as possible.
The design of the digital currency should be based on sound economic, safety and service principles, ensure a low cost of use for the digital currency and wide coverage, achieve seamless integration of the digital currency with other payment tools and enhance the usefulness and vitality of the digital currency.
While moving forward with research into digital currencies, the People’s Bank of China has established communications channels with relevant international agencies and Internet companies and has conducted extensive discussion with domestic and foreign financial institutions as well as traditional card-based payment operators. Both Chinese and foreign nationals who participated in the discussions take this work very seriously and conducted in-depth exchanges with experts within the People’s Bank of China system regarding related theoretical research, exploration of applications, practices and development pathways.