The head of China’s central bank, the People’s bank of China (PBOC) has provided more details about the bank’s significant recent revelation. Less than a month ago, the PBOC announced that it will try to launch its own digital currency “as soon as possible.”
The governor notes that China’s digital currency will be fundamentally based around central banking system principles. He opined that the central bank will fully consider “the current monetary policy framework, money supply and creation mechanism,” when designing its digital currency.
He revealed that the implementation of digital currencies is a necessary evolution required of the monetary system to keep abreast with technological advances. Deeming paper money as “last generation currency,” the governor cites the rapid technological advances of the internet and global payment systems made it necessary for the Chinese society to embrace the issuance and circulation of digital currency.
Separation from Bitcoin
A question put forth by the publication pointed to what it deemed as the “51% attack security loophole” of Bitcoin, wherein a mining pool or a collective of miners making for the majority (>51%) could possibly corrupt the decentralized register, together. In response to the query, the governor underlines the digital currency as one to be issued by the central bank with anti-forgery techniques that he deemed were “national secrets,” similar to those implemented to combat anti-counterfeiting with paper currency.
Speaking to Caixin Weekly, he stated:
As for the hotly debated “51% attack”, it is more about the Bitcoin. The Bitcoin does not involve a central bank. For a digital currency controlled by the central bank, a combination of technological measures, institutional design as well as laws and regulations will be applied to ensure the security of its operation system.
This differs from the Bitcoin at the very start.
Xiaochuan made a marked indication of protecting people’s privacy as an important part of the design of the PBOC proposed digital currency. He further claimed that it might be a necessity for digital currencies to be transacted anonymously, citing the possibility of the government failing to protect people’s privacy and use of wealth.
These two fundamental rights, he deemed, should be “definitely” upheld and protected.
While the governor revealed that the PBOC spent plenty of time and resources to research the potential applications of blockchain technology, he revealed that the blockchains experimented have, so far, required far too many computation and storage resources. Furthermore, Xiaochuan also underlined that the blockchains that were looked-into were incapable of handling the current transaction volumes.
However, he did address the privacy offered by blockchain technology as a non-counterfeiting, non-account-based distributed ledger.
If a digital currency wants to emphasize privacy protection, blockchain technology is a good choice.
When asked by Caixin as to when digital currency will replace paper money entirely, Xiaochuan responded with stating that there were no specific timetable set for deployment yet, citing the sheer logistics of such an operation to transform the world’s most populated country and one of the biggest economies around.
It will only take several months for a small country to replace an old version of paper money with a new one. But it has taken about ten years for China to do the same thing.
Also, Xiaochuan noted that electronic currencies will co-exist with paper currencies for a while before finally replacing them.
Ultimately, the PBOC issued digital currency will be based on the same principles of the Chinese yuan despite borrowing certain facets heavily from cryptocurrencies such as bitcoin.
[A]s a legal tender, digital currency must be issued by the central bank. The issuance, circulation and transaction of digital currency will follow the same management principles of traditional currency.
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