The People’s Bank of China (PBoC) has announced a national Cryptocurrency.
The announcement was made during the China Finance 40 Forum convention in Yichun Heilongjiang signifying that the Crypto could have the backing of the top brass in the Communist Party of China.
China’s Crypto Is Ready For Deployment
One of the key takeaways from the announcement made by Mu Changchun- the deputy director of PBoC- is that the Crypto is ready for deployment for mass adoption.
The report also reveals that China’s lender of last resort has been undertaking the project in the last five years. The project culminated in the successful trial of the prototype that runs on a next-level Blockchain infrastructure.
Will Mass Adoption Be Realized?
The biggest hurdle that the PBoC faces is how to issue the Crypto in the world’s second-largest economy with 1.3 billion. For this reason, the bank is already alive to the fact that the Digital Coin may not achieve the ideal characteristics that are needed for a currency that the retail sector adopts on a broad base in the short term. Hence, the PBoC has committed to remain open on the technical route of issuing the coin to ensure that widespread adoption is realized.
The Crypto Will Be Issued On A Two-Tier Basis
Cryptocurrencies are native Tokens of Blockchain platforms, in this perspective, the PBoC has a platform for hosting Crypto transactions.
According to a Shanghai Securities media, Mu Changchun stated that the architecture of the Blockchain platform will support a two-tier system of issuance. This means that the design intends to enhance adoption rates and accessibility for the public.
It is critical to note that in a single-tier system, the PBoC could have been a single issuer of the Crypto. In contrast, a two-tier system onboard banks and other agencies that will be receiving the Crypto from the central bank for public consumption.
Further, the architectural design will allow PBoC to distribute the Crypto to Chinese banks to roll out banking products for Crypto.
A Single-Tier System Could Adversely Affect Commercial Banks
In support of the two-tier system, Mu Changchun alludes that a single-tier system could be detrimental to the economy. This is because the system could have required retail banks to raise their capital base by depositing an equivalent of Cryptos to the PBoC to sell the Digital Tokens. This factor would have affected their ability to lend and they would have been more dependent on other banks.
Therefore, the two-tier system is the best of both worlds in respect to maintaining commercial banks’ sovereignty as well as ensuring that the PBoC realizes its aim reaching as many people as possible.
Is China Aiming To Undo Facebook’s Libra?
The CEO of Huawei, Ren Zhengfei, had previously stated that China needs to issue its own national Crypto to counter the projected influence of Libra Coin. Zhengfei also added that China as a country could issue a more powerful Digital Token that “an internet company” (Facebook).