After the whole month of China banning cryptos, this news from People’s Bank of China comes as a true shock. This idea has been hinted before by Yao Qian, the director of PBoC’s digital currency research lab.
In an op-ed article published in local newspaper, Fan Yifei, vice governor of People’s Bank of China has suggested on bank’s line for introducing central bank’s digital currency (CBDC).
However, Fan mentioned that the new digital currency won’t be based on blockchain technology and hence, won’t be decentralized. It will be centralized and issuance will be of high-level priority.
Further, Fan stated,
“CBDC will still be the central bank’s liability to the public. The nature of this liability will not change just because of the physical form of cash going digitalized. Therefore, we must ensure the central role of PBoC in issuing CBDC. A CBDC will also help curb the public’s demand for private cryptocurrencies, which will strengthen the role of our sovereign currency.”
As CBDC won’t be based on peer-to-peer mechanism, eliminating the whole anonymity and untraceability features. The PCoB will act as the third party, who will keep an eye on the transaction sto prevent money laundering and illicit actions.
Fan also specified that PBoC will be cautious in introducing future smart contracts in CBDC. He suggested, since CBDC will be substitute to the country’s fiat currency, existing laws on yuan should also be exerted on digital currency.