SHANGHAI (Reuters) – China is preparing to be the first country for the introduction of a digitalised national currency to market participants, and experts say that it is a testament to both financial innovation, and Beijing’s desire to have a fail-safe control over the cash economy.
FILE PHOTO: A Chinese national flag flies at the headquarters of the People’s Bank of China, the country’s central bank, in Beijing, China, on January 19, 2016. REUTERS/Kim Kyung-Hoon/File Photo
China’s central bank has revealed some of the specific characteristics of each of the Digital Currency, Electronic Payment is made (BROUGHT) project, which has been five years in the making, but details have trickled in the last few weeks on the couch with the papers on the subject.
Akin to Facebook’s ‘ suggested Scale, digital currencies and other cryptocurrencies, such as bitcoin, its BROUGHT, it will be powered by a portion of blockchain technology and distributed via the digital wallet.
What is it that makes it a little away from each other, however, are the features that allow the central bank to follow the movement of the currency, and even the supervision of the operations.
The digital currency’s design seemingly provides Beijing with an unprecedented oversight over the flow of money, which the Chinese authorities have a certain degree of control over their economies, most central banks do not have.
The main motivation behind the project, market observers say, has been China’s desire to have its capital in the borders in the face of fears that the newer global payment systems, and cutting-edge technology for the facilitation of illicit financial flows.
“There is a consensus across the whole of the world, the governors of the central banks and the governments that they would like to be in control of the money and the money supply and seigniorage that comes along with it,” said Keyu Jin, professor of economics at the London School of Economics, on the sidelines of a forum in Singapore.
“But it is about obsessive control, and the governance is likely to be more unique to China than anything else.”
So far, Beijing has sent mixed messages on how quickly the digital currency will be introduced.
The head of China’s central bank, digital currency research institute, Mu, Changchun, told a public forum in August that it was “almost ready”. However, in September, China’s central bank chief Yi Gang said that there is no time frame for its implementation, and that it is necessary in order to comply with the requirements of the money laundering.
The authorities, however, do not beat around the bush for their disapproval of Facebook’s Scale, labelling it a threat to the sovereignty of China and other emerging economies, as well as to insist that the digital currency should only be issued by the government and the central bank.
Mu refers to the fear and the desire to maintain control of his classes. “Can you imagine, if we can agree upon, is that the yuan can be converted into a Scale, there will definitely be a huge change, triggering yuan depreciation and amortization.”
The People’s Bank of China (PBOC) did not immediately reply to Reuters ‘ questions about the digital currency plan.
CONTROL, A LITTLE BIT OF ANONYMITY
More than 50 patents have been filed by the PBOC and the Mu’s comments on the PBOC’s plans for the distribution of digital currency through the commercial banks, as well as how it is in the physical policy.
It will be followed by a model that is known to the majority of users of the systems, such as Apple Pay, as well as Chinese payment processor Alipay, in which the commercial banks to distribute the cash via a digital wallet, which can be found and downloaded on the phones too.
However, in contrast to the physical cash, for a patent is filed, it appears that the bank is exploring with the tracking system, the digital currency’s movements be traced between the business and its people.
Mu said it’s BROUGHT, also, it would be a balance to be struck between allowing anonymous payments, and is “classified ” surveillance” in order to prevent illegal activities such as money laundering, the authorities will monitor such cases using a big data certification.
As an example, at Mu, said the telephone fraud will tend to be characterized by a large, fragmented and sums of money suddenly deposited into a bank account for a short period of time before the rapid dispersal and disappearance in several bank accounts.
“As soon as we get the analysis of these transactions, and the use of big data and data mining technologies, and behavior-identity equations, and we will be able to find the culprits.”
THE WAY FORWARD
So far there has been very little response from the general public, in a country that has been used for weak privacy protections and a high level of the government’s digital surveillance of its people.
The few public discussions on Chinese social media platforms such as Weibo have expressed mixed views, with some saying that it was to prevent corruption. However, a user asks, “What happened to my freedom to build wealth, and my secrets, and safety.”
As a Union, to Pay an official told Reuters the PBOC was likely to be resistance to be overcome by any third party such as a creditor due to its potential for the renewal of the existing banking system.
“In theory, digital currencies could not be gone on with, a bank account,” he said. “The launch has been more about politics than technology.”
A chinese yuan bill with the late Chinese chairman Mao Zedong, and the keyboard of the computer will be reflected on the image of the Chinese flag, in this example, the 1 November, 2019 at the latest. REUTERS/Florence Lo/Illustration
In spite of the uncertainty over the launch of the conference of the Mu, and the subsequent revelations have heightened expectations from China and around the world.
“The PBOC has been in the study BROUGHT up for five or six years old, and I believe that it has reached a level of maturity,” Huang Qifan, the vice-chairman of the Beijing-backed think tank China Center for International Economic Exchange, told a finance forum on Monday.
“China will probably be the first country in the world to issue a sovereign digital currency.”
Editing by Vidya Ranganathan and Kim Coghill