Governments across the globe have taken a keen interest in Central Bank Digital Currencies [CBDC], China, however, seems to be at the forefront of this technological innovation. While several countries have just started to probe the prospects of CBDCs, China has a head start with the same. The launch of CBDC left several hoping to achieve financial freedom as well as privacy, however, China seems to have an ulterior motive.
So Close Yet So Far
As per an article published by Fan Yifei, the Deputy Governor of the People’s Bank of China, in the bank’s newspaper, that the digital yuan would fall under the purview of the country’s “centralized management.” The Governor further wrote in the article,
“China is developing a sovereign digital currency with the primary goal of defending the state’s monopoly on minting money, meaning the central bank will play a central role in the issuance and circulation of a digitised yuan.”
Even though the Central Bank is creating the currency, the Chinese authorities will reportedly have command over the activities like issuance, circulation as well as transactions of the digital yuan.
Despite the fact that the country has taken a huge leap into modernizing the financial sector, the latest article by the Governor defies factors like anonymity and privacy that have been the key characteristics of cryptocurrencies. China continues to test the digital yuan for the past one year, leaving other countries way behind in the financial race. Even though the acceptance of the digital yuan remains uncertain, the obligation of doing so is certain, the Governor added.
Platforms like Facebook intends to increase financial accessibility and freedom via the Libra project. Fan believes that Facebook’s crypto venture along with other existing cryptocurrencies could challenge the Chinese Central Bank in minting money.
The Governor further added,
“[…] the loss of money minting power in the digital era, and to ensure that currency issuance always serves overall national development and reform.”
While the launch date for the CBDC is unsure, the Governor affirmed that the digital yuan would not replace physical currency immediately as it would “create a huge waste.” However, the Chinese Central Bank has reportedly categorized the former as the most liquid form of money.
Additionally, laws and regulations pertaining to the incorporation of the digital yuan are yet to be put in place. Even though the CBDC promises a better and faster flow of money via transactions, it seems like the digital asset would take some more time to launch.