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China’s Central Bank Completes Digital Currency Trial on a Blockchain

Last Updated March 4, 2021 4:54 PM
Samburaj Das
Last Updated March 4, 2021 4:54 PM

The People’s Bank of China (PBOC) has completed a trial run of digital currency based on blockchain technology.

According to a recent report from Chinese publishing giant Caixin , the central bank completed a trial that saw transactions settled with its own digital currency. Developed by the PBOC, the digital currency was tested on a blockchain and the trial was completed in mid-December 2016.

The trial took place on a shared distributed ledger that saw several major commercial banks as participants. The world’s largest bank by assets, the Industrial and Commercial Bank of China along with the Bank of China – both government-owned banks – participated in the trial. So too, did privately owned WeBank, hinting toward a sweeping effort toward the possible digitization of the Chinese Renminbi, the country’s fiat currency.

The report also revealed how the government plans on setting up the digital payment infrastructure, when functional and ready for deployment.

An excerpt from the report reads:

When the system is ready, the central bank’s pilot digital bank acceptance exchange platform will be connected with the existing Shanghai Commercial Paper Exchange to form a national platform for bank bill transactions.”

Further, the publication also cites sources that point to an exclusive ‘digital currency research institute’ to be setup by the PBOC. The central bank issued a public recruiting call in November 2016 seeking experts in developing blockchain technology, big data, cryptography, and systems’ design. As a mandatory requirement, applicants must hold a master’s or a doctoral degree in cryptography, computer science of information security.

The marked public effort toward digital currency & blockchain development and adoption by the central bank has spurred the wider banking sector in China – heavily reliant on paper – to start their own recruitment drive in hiring blockchain experts in recent times.

Early Development

The PBOC is among the earliest known efforts by a central bank to research and explore the possible issuance of a nationwide digital currency. China’s central bank put together a specialist research team as early as 2014, engaging experts from Citibank and Deloitte toward the discussion of the regulatory frameworks required for a national digital currency.

The PBOC has stated its intention to issue its own digital currency “as soon as possible.”

A common consensus from officials points to a “practical and far-reaching historical significance” with the issuance of a national digital currency if China becomes the first country in the world to do so. The PBOC’s endeavor to explore its own digital currency was only revealed in early 2016, despite having already researched the idea for two years.

A month after the public reveal, PBOC governor Zhou Xlaochuan added: “blockchain technology is a good choice” as a non-counterfeiting, non-account-based solution that emphasizes privacy protection.

Separation from Bitcoin

“As a legal tender, the digital currency must be issued by the central bank”, stated Xiaochuan in the same interview, who added that a PBOC-developed digital currency “differs from Bitcoin at (from) the very start.”

Perhaps coincidentally, the PBOC has been more prominently involved in looking into the operations of China’s major bitcoin exchanges since the successful completion of its own digital currency trial. The central bank’s “on-site” checks of bitcoin exchanges has the authorities pointing to “irregularities” in the trading platforms’ business practices. Following early inspections, bitcoin exchanges stopped margin trading options and began enforcing trading fees for bitcoin transactions.

Last week, the PBOC confirmed that its on-site inspections of these exchanges “will continue.”

Images from Shutterstock.