China’s central bank, the People’s Bank of China says it has completed the “top-level design” and testing of its yuan-backed digital currency, meant to partially replace cash in the country.
The PBOC believes that the digital yuan can help maintain control over the nation’s money supply by operating the it as a centralized system that utilizes blockchain or another new technology that evolves from the nation’s penchant for electronic payments.
The next steps in the country’s digital currency/electronic payment, or DCEP, project—which it has been hammering away at for five years—are to follow the principles of stability, security and control and to select pilot verification areas, scenarios and service scopes, according to Mr Mu Changchun, the head of the PBOC’s digital currency research institute.
As far as the central bank is concerned, DCEP beats Libra in terms the ability to process transactions offline on mobile phones. It also claims one of the goals for the digital yuan is to promote the internationalization of the renminbi since it can be used in cross-border payments without going through banking intermediaries that charge a fee and take more time to process these transactions.
China is aiming to be the first country in the world to issue a state-backed digital currency. A team within its central bank started working out the details of its DCEP project in 2014. The plan is not to create a new currency—which is what Facebook had in mind with its Libra stable coin project—but to partially digitize China’s existing cash in circulation.