Yesterday, Changpeng Zhao raised a burning question on his official Twitter handle about whether it will be a race or will China get it just like that from the U.S.
Now is it going to be a race? Or will US just hand it to China?
— CZ Binance (@cz_binance) August 28, 2019
The spark comes from the recent development on the Chinese side. The country’s central bank is planning to release state-supported crypto. This crypto will be issued to seven institutions. As per Paul Schulte, these seven institutions include-
- The Industrial and Commercial Bank of China which is the largest bank in the world,
- Bank of China, the second-largest bank in the world,
- The Agricultural Bank of China,
- Tencent, and
- Union Pay.
Another source, which is related to the developmental work of the crypto, revealed that there is a possibility of adding an eighth institution which can be among the first tier of recipients. By far the name of this eighth institution has not been revealed.
Will we see the crypto on China’s Singles Day?
Further, reports say that since last year the technology for the crypto is ready and that the launch of the crypto is to be expected soon. A tentative date is predicted for 11th November, which is the Singles Day in China- the heavy shopping day in the country.
What will these seven institutions do?
After the launch, the institutions will distribute the cryptos to 1.3 billion citizens of the country. Further, with time, the cryptocurrency is expected to reach as far as the United States and other countries in the west.
The point of appointing seven different institutions runs parallel to the ongoing worldwide trend of involving many supportive companies under one umbrella idea. For example, Master Card and Uber in the United States, Vodafone in England and Mercado Pago in Argentina are involved in supporting Facebook’s Libra through several currencies that will be issued by the central bank. On similar lines, Mark Carney, the Governor of Bank of England, suggested that a new currency should be introduced which has the support of many central banks. The idea here is to replace the U.S. dollar.
What makes China’s DC/EP stand apart?
On this Schulte said-
“China is barreling forward on reforms and rolling out the cryptocurrency. […] It will be the first central bank to do so.”
China’s DC/EP crypto is very much different from Facebook’s Libra and Carney’s “synthetic hegemonic currency” (SHC.) Both of them have their own set of issues such as Libra is being securitized over the need of world’s financial regulation grounds, whereas, Carney’s ‘synthetic hegemonic currency’ (SHC) is still to manifest. Further, other points that set China’s DC/EP crypto apart include-
- Another difference is that Libra is constructed to manage 1000 transactions per second, whereas China’s DC/EP crypto will be able to manage 300,000 transactions per second.
- As per sources, China’s crypto is not a “pure blockchain architecture.” This eliminates the dependency of the transactions to fill up the block. Instead, it is centrally managed.
- There is no algorithm to limit the supply; instead, the central bank will take care of it.
- The aim of China’s DC/EP crypto is to replace the tangible notes and coins out there in the world, and not the digital form of the same within the bank.
The two-tiered structure of China’s DC/EP crypto-
Further, the two-tiered structure of China’s DC/EP crypto coincides with the deputy director of the Paying Division of the People’s Bank of China (PBOC)- Mu Changchun, who at the China Finance 40 Forum said that the two-tiered structure “pay the central bank 100% in full.” As per him, this structure will-
- Eradicate the public demand for various cryptographic assets,
- Strengthen China’s National currency,
- Central Bank’s control on the financial system,
- Mass adoption of the cryptocurrency,
- The power will not be only in the hands of the central bank, but will be shared by many, thus making all them very responsible,
Further, Mu Changchun added-
This dual delivery system is suitable for our national conditions. […] It can not only use existing resources to mobilize the enthusiasm of commercial banks but also smoothly improve the acceptance of the digital currency. […] The central bank’s digital currency can be circulated as easily as cash. Which is conducive to the circulation and internationalization of the renminbi.