China: the subject of the digital yuan is back on the agenda for 2020. The deputy director of the People’s Bank of China (PBoC), Mu Changchun, has now said that it will be something other than Bitcoin (BTC) and stablecoins.
The South China Morning Post has now announced that the head of the PBoC’s digital currency research institute has said that the digital currency will in essence be a digitalized form of the yuan, but without the possibility of speculating on the stock exchanges. Moreover, it is not envisaged to build a basket of currencies that would additionally support its value. Mu explained to him:
“A currency is not for speculation. It is different from bitcoins or stablecoins, which can be used for speculation or which need to support a basket of currencies. ”
China and its digital yuan
Mu also recently indicated to him that the new national digital currency in China will operate in a two-tier system. As it were, PBoC will stand on top and commercial banks on the lower level. However, the system is to have a centralised form.
In November, the country’s central bank announced that it intends to carry out a pilot project, which will last two years and will be implemented in stages in Hebei and Zhejiang provinces and Shenzhen city.
At the same time, Mu explained to him that China is not starting a war on cash by introducing its own digital currency. Rather, Beijing intends to replace the paper yuan with a new currency. It is also known that the project is a response to Facebook’s Libra, which, in the opinion of not only politicians of the Middle Kingdom, may threaten the fiat currencies.
It is also because of Libra that the Chinese central bank has accelerated its work on launching the digital yuan. The second reason is also the idea to challenge the US dollar. According to Saxo Bank’s forecasts for 2020, Asian countries can generally build a new reserve currency to free themselves from the dollar during this period.
So far, this work is being carried out under the watchful eye of PBoC, but also of the country’s four major banks and large corporations, such as China Telecom, which are also to test digital payments.