A step closer to a dig­i­tal cur­rency

Al­go­rithm trial run gives tech edge in reg­u­lat­ing sup­ply of sov­er­eign fiat

China Daily - - FRONT PAGE - By WANG YANFEI wangyan­fei@chi­nadaily.com.cn

The Peo­ple’s Bank of China, China’s cen­tral bank, has com­pleted trial runs on the al­go­rithms needed for dig­i­tal cur­rency sup­ply, tak­ing it a step closer to ad­dress­ing the tech­no­log­i­cal chal­lenges as­so­ci­ated with dig­i­tal cur­ren­cies, ac­cord­ing to a top of­fi­cial as­so­ci­ated with the project.

Yao Qian, di­rec­tor-gen­eral of the In­sti­tute of Dig­i­tal Money at the PBOC, said China’s cen­tral bank has suc­cess­fully de­signed a pro­to­type that can reg­u­late the sup­ply of its fu­ture dig­i­tal fiat cur­rency.

The suc­cess­ful sim­u­la­tion of money sup­ply paves the way for the cen­tral bank to be­come the fu­ture sole reg­u­la­tor and pol­i­cy­maker gov­ern­ing the value of dig­i­tal fiat cur­rency, said Yao.

Dig­i­tal fiat cur­ren­cies are the dig­i­tal forms of a sov­er­eign cur­rency that is backed by the cen­tral bank.

Un­like Bit­coin or other dig­i­tal money is­sued by the pri­vate sec­tor, the dig­i­tal fiat cur­rency has the same le­gal sta­tus as the Chi­nese yuan, the only fiat cur­rency is­sued by the Peo­ple’s Bank of China.

There is no timetable for the in­tro­duc­tion of the cur­rency, but once in­tro­duced, China is likely to be­come the first coun­try that would de­ploy a dig­i­tal fiat cur­rency.

China’s cen­tral bank has been ac­tively pre­par­ing for dig­i­tal fiat cur­ren­cies since last year.

Ear­lier in June, the cen­tral bank fin­ished sev­eral dig­i­tal money tri­als in­volv­ing fake trans­ac­tions be­tween it and some of the coun­try’s com­mer­cial banks

“China has been at the fore­front in dig­i­tal pay­ment tech­nol­ogy de­vel­op­ment,” said Di Gang, a se­nior en­gi­neer of the in­sti­tute.

“How­ever, it would still be some time be­fore the cur­rency goes pub­lic,” said Di, adding that, “the cen­tral bank is pro­ceed­ing very cau­tiously.”

Apart from solv­ing the tech­nol­ogy chal­lenges, there are a num­ber of other con­cerns that are yet to be solved such as man­ag­ing risks and im­prov­ing ef­fi­ciency, ac­cord­ing to Di.

The gov­ern­ment also needs to fac­tor whether the pub­lic would use the new cur­rency, he added.

“The cen­tral bank might be able to start tri­als in some de­vel­oped re­gions such as Bei­jing, Shang­hai and Guang­dong prov­ince, and see how ci­ti­zens re­spond to the dig­i­tal cur­rency,” he said.

The de­vel­op­ment of a dig­i­tal cur­rency comes at an op­por­tune time for China, said Yao.

The rapid de­vel­op­ment of the elec­tronic pay­ment sec­tor and thriv­ing pri­vate dig­i­tal cur­ren­cies have made it im­per­a­tive for China’s cen­tral bank to move quickly in dig­i­tal fi­nance.

Look­ing ahead, de­ploy­ing the dig­i­tal fiat cur­rency is ex­pected to be smarter and more in­tel­li­gent com­pared to the pay­ment providers us­ing ex­ist­ing cur­ren­cies, such as Ali­pay, ac­cord­ing to Yao.

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