China’s digital currency approach will be favoring international payments and domestic retail system, a former senior official said.
Zhou Xiaochuan, the president of the Chinese Finance Association and former governor of the People’s Bank of China (PBoC), outlined two types of implementations of central bank digital currencies (CBDCs) speaking at the 2019 Caixin Hengqin Forum 财新横琴论坛.
He outlined these three areas digital yuan could be used:
- The DCEP (Digital Currency, Electronic Payment) will be used for retail markets among everyday consumers (i.e. day-to-day transactions).
- International remittances. It will allow for easier inter-bank settlement. Payment ramps will be introduced.
- The digital Yuan will also help to maintain national sovereignty. Being a monetary economist, Xiaochuan does believe the Yuan should have competition within China.
China to focus on digital yuan
Zhou, the longest-serving head of PBoC and an influential financial expert hinted that China will continue along the established path for its own digital yuan, dedicated to domestic retail system and payment.
According to Zhou, these two goals will require different technical designs for the digital yuan, and China might expand its capabilities once it implements the digital payment function in retail.
Last month, top Chinese economics think tanks believe that the PBoC will be the first to launch a digital currency successfully. While apparently continuing to develop its digital yuan initiative, the PBoC had also enhanced its crackdown on cryptocurrency-related operations in the country. Last week, the bank warned that it was taking action against entities involved in trading cryptocurrencies like Bitcoin (BTC).