Changchun Mu, the Digital Currency Research Institute chief and former deputy director of the payments and settlement division at the People’s Bank of China (PBoC) commented on their newly proposed digital yuan. He revealed that the new digital currency bears similarities with Facebook’s proposed cryptocurrency, Libra and would be usable across major payment platforms such as Tencent’s (0700.HK), WeChat and Alibaba-backed (BABA.N) Alipay.
Mu described digital currency as an electronic payment tool with “value characteristics.” He also added that the development and issue of the coin would help protect the foreign exchange supremacy of the country because the commercial applications of such currencies have expanded.
Mu explained to the state-run newspaper Shanghai Securities News,
Why is the central bank still doing such a digital currency today when electronic payment methods are so developed?. It is to protect our monetary sovereignty and legal currency status. We need to plan ahead for a rainy day.
He said that the tokens would be safe like the central bank-issued paper notes and could be used even in the absence of an internet connection. So, it would allow transactions to continue even in situations where communications have been disrupted, such as an earthquake.
The proposed Chinese yuan will likely be under surveillance by the Chinese government and can be used to circumvent U.S. trade bans. The central bank had set up a research team in 2014 to explore launching the digital currency to cut the costs of circulating traditional paper money and improve policymakers’ control of the money supply in the Economy. It had not announced anything since, but last month Mu announced that the digital currency was “almost ready” for release.
Facebook’s Libra had sparked concerns among global indexes that it could swiftly become a dominant digital currency and a podium for money laundering because of the social network’s massive cross-border influence.
Libra will be backed by a reserve of real-world assets, like bank deposits and short-term government securities, held by a chain of custodians. Its structure is designed to foster trust and price stability and could be used on mobile devices and is to provide financial services to those people who don’t have access to traditional bank accounts. It will be exchangeable with a variety of traditional currencies, like the U.S. dollar and the Euro.
Some financial analysts say China appears to have stimulated the push ‘towards digital money’ after the US social media giant announced its plans to launch its digital coin, in June.
Changchun Mu said China’s digital currency would strike a balance between allowing anonymous payments and preventing money-laundering. Mu also said that the digital currency would be used as per central bank-issued coins in terms of losses incurred when a platform goes down, because of its ability to be used in the absence of an internet connection.