Launch plan for China’s central bank digital currency accelerates

According to a report by Forbes, seven institutions will be responsible for distributing the first allotment of tokens to China’s citizens and businesses.

7 Chinese institutions

The first institutions are said to be retail powerhouse Alibaba, Internet giant Tencent, China Construction Bank, the Industrial and Commercial Bank of China, the Bank of China, the Agricultural Bank of China and Chinese banking association Union Pay.

A source confirmed to Forbes that the above institutions are in line to be the first to receive the People’s Bank of China’s central bank digital currency tokens. The tokens are referred to as DC/EP — an abbreviation of Digital Currency/Electronic Payments.

Ready to deploy

According to a new report by Binance Research, China has been actively working on a central bank digital currency for several years. The People’s Bank of China was motivated by the idea that a digital currency would increase official control over the money supply. “Through the digitalization of the RMB, the PBoC aims to improve the effectiveness of its monetary policy, while mapping out a more comprehensive picture of all individuals and businesses across China. Further, another key purpose is to increase both the RMB’s turnover rate and its global reach,” says the report.

This is in contrast to Western governments, who appear to have only considered digital currencies as an abstract research subject, whereas China’s CBDC is now ready for deployment. The Binance paper suggests that the sudden release of the whitepaper for Facebook’s Libra project, which appeared to catch global policymakers off-guard, was a catalyst for China to accelerate its plans. This is due to growing concerns around the potential for further capital outflows that could weaken the renminbi (RMB).

While final details are yet to be confirmed, the Binance research team concludes that the People’s Bank of China is preparing to launch a digital currency backed 1:1 by fiat reserves. The intention is to replace the M0 supply, through the digitization of cash.

“Built on a two-tier system, the Chinese CBDC would be distributed through two distinct layers: (1) between the central bank & commercial banks and (2) between commercial banks and individuals & businesses. While the first layer is to run on a permissioned blockchain system, it is not yet clear what technology will be used on the second layer network.”

According to Forbes, the digital currency is ready for deployment and may be launched as soon as November.