China has fervently regressed the idea of Cryptocurrency; the reason is simply that it would distort the functioning of the conventional monetary market. Cryptocurrency, the concept as such is predominantly dependent on the blockchain technology which claims itself to be on a decentralized platform with security on high alert, but China’s pugnacity concern is the speculative nature of the Cryptocurrency which underpins volatility rather than stability.
China’s Central Bank Digital Currency (CBDC) is all set for a launch after 5 years of arduous research and development since 2014. China’s prejudice against the cryptocurrency and its attempt to introduce the digital currency is a paradox in disguise. This tends to an apparent conclusion, that, Chinese Government wanted to set up a Digital Currency system which would wholly operate under the State’s control. The next strong reason being, it did not want the discrepancies of Cryptocurrency to creep into the nation, also make the economy more self-reliant and reduce its interdependence on Foreign technology.
Mu Changchun, Deputy Chief in the Payment and Settlement Division of the People’s Bank of China (PBOC), at the China Finance 40 Group meeting on Saturday, 10th August 2019 had not only announced its inaugural but shared the fact that CBDC prototype (simulation of the actual) already exists. What comes out as a surprise or rather a shock is that PBOC’s Digital Money is constructed on the pillars of the Blockchain technology, though the officials refurbish the statement as “it does not rely entirely on a pure blockchain architecture”. The disparity arisen corresponds to the obstructive implementation, i.e., if the blockchain architecture is completely replicated then the digital currency would be less pervasive for retail usage.
CBDC’s implementation in the Chinese economy has been operationalized in the form of a two-tier structure. Tier-I would cater to the People’s Bank of China and Tier-II would be the Commercial banks. China is a huge economy, with widespread territories and abundant human resources. Certainly, this dual delivery system would fervor accessibility at all levels and operational convenience would increase public willingness to adopt and transact through the digital currency. CBDC is an effort to channelize existing resources, talent, and augur enthusiasm among the Commercial banks and businesses who are going to be the medium of smooth implementation.
As this system is not plagued by the intermediaries and is fool-proof, it would solve the issues relating to the cross-border transactions, extended straddle times, inefficiencies and manual retardation. China UnionPay Chairman, Shafou Jun, addresses the concern that the CBDC system would be worthwhile only if operationalized as strategized. This gives a strong indication that the Chinese government is ready with its digital currency, but the procedure to its functionality is still ambiguous. China’s digital currency is all set to witness the day’s light, but its success is a challenge which one must overcome for its existence.