In pictures
China is in no hurry in developing a digital currency, Zhou Xiaochuan, the country's central bank governor, said here Friday. The development of a digital currency should be a prudent progress and avoid excessive speculation, Zhou said at a press conference on the sidelines of the annual session of the National People's Congress. He added that the financial sector should focus on serving the real economy.
Zhou Xiaochuan stated that the development of digital currency is inevitable. The Central Bank’s research and development name is DCEP (Digital Currency Electronic Payment), DC is a digital currency, and EP is electronic payment. In the future, traditional banknotes may gradually shrink in size and may not even exist one day. However, in this whole process, we must pay attention to overall financial stability and prevent risks. As a currency, digital currency must consider the transmission mechanism of monetary policy and financial stability at the time of issuance, and at the same time pay attention to protecting consumers. As a big country economy, we must avoid making substantial irreparable losses, so we must pass thorough tests to ensure that we can promote it after it is reliable.
"Lots of cryptocurrencies have seen explosive growth which can bring significant negative impact on consumers and retail investors," Zhou said. "We don't like (cryptocurrency) products that make huge opportunity for speculation that gives people the illusion of getting rich overnight."
My thoughts on the matter
It's still a long way away, but once a digital RMB is announced, I think it will serve to fulfil all the roles of traditional RMB with extra advantages to the banking system and the Chinese Government. The primary advantages of the digital RMB will be the ability for the Central Bank to control and monitor the flow of currency with precision, thereby obtaining more actionable data to inform monetary policy, reduce circulation costs, increase transparency and curb criminal activity (money laundering & tax evasion).
I predict that the digital RMB will be closely tied to a digital identity that all Chinese citizens will need to possess, therefore money laundering and tax evasion will become extremely difficult. Following the money trail to catch criminals will become simple. In combination with the extensive CCTV network in China, committing a crime and getting away with it will be more difficult.
I feel digital RMB will probably happen within the next 5 years. The digitisation of the RMB will occur gradually and be co-ordinated by the People's Bank of China (PBOC) and the four major Chinese banks, Bank of China (BOC), the China Construction Bank (CCB), the Agricultural Bank of China (ABC), and the Industrial and Commercial Bank of China (ICBC). The population of China will barely realise it happening. The citizens of China will not mind the change as it is similar to their existing status quo (most transactions in 2018 are digital anyway with WeChat, AliPay, cash is rarely used). Law abiding citizens will not notice a difference in their day to day lives as the RMB they use is replaced by digital RMB.
What do others think? Other useful links – Technical Consideration of Central Bank Digital Currency by Yao Qian (Director of the Central Bank's Digital Currency Research Lab) – Some Considerations Regarding the Central Bank's Digital Currency by Fan Yifei (Deputy Governor of the People's Bank of China)
submitted by
