China’s central bank has moved closer to launching a central bank digital currency, in a move that would see the bank become the first major global central bank to issue currency on the blockchain.
The People’s Bank of China has long been reported to be working on a digital currency, thought to be ahead of rival central banks in developing a working model for a digital yuan.
According to a new report, the bank appears to have finished developing the currency’s basic function, and is now thought to be working on laws to introduce the digital currency into circulation. Chinese news outlet Global Times suggests the bank has been working with the private sector, most notably Alipay, a subsidiary of Alibaba, to develop the technology.
Alipay has been reported to have submitted five separate patents based on the digital currency, including its issuance, payment and circulation, since the start of the year.
An industry insider quoted in the report said “the first step of technological development has been basically completed.”
Earlier this year, the bank confirmed it was working on developing its digital currency, saying plans were “progressing smoothly.” The central bank is thought to have been working on developing the digital currency since 2014.
Industry commentators said the unfolding coronavirus crisis meant the bank should now accelerate work on the currency, with a view to launching as soon as possible.
Cao Yan, vice director of the Advanced Research Institute of Blockchain at the Yangtze Delta Region Institute of Tsinghua University, said lowering interest rates to negative percent would present the perfect opportunity to introduce a digital currency into circulation.
If there is a chance China is considering lowering its interest rate into negative territory as a final option and directing such policy to commercial loans and lending, a circulated digital currency rather than M0 will be able to achieve that.
The news will likely be of interest to other central banks worldwide, with most of the world’s major reserve banks already known to be working on similar proposals.
No launch date for the digital currency has yet been set, though the latest report suggests the bank is now at an advanced stage of the development process.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
