The People’s Bank of China (PBoC) report that its digital currency is “progressing smoothly.” They added that research and development work into the national digital currency would continue in 2020, as Beijing is keen to create a digital currency to offset perceived risks posed by emerging cryptocurrencies.
The central bank announced the development at its annual work conference held in Beijing. However, the PBoC did not announce the launch date yet.
China’s digital currency has been in the works for at least five years, with the PBoC having started the initiative in 2014.
The bank released a statement claiming:
“We will continue to steadily advance the development of legal digital currencies” in 2020.”
The much-anticipated digital ‘yuan’ will be first distributed to commercial banks, and then users and companies can register digital wallets with these commercial banks.
The PBOC is reportedly partnering with several state-owned commercial banks and telecoms, including the Industrial and Commercial Bank of China, Bank of China, the Agricultural Bank of China, China Mobile, and a few other corporations to roll out the test.
Digital Currency Set to Counter Facebook’s Libra
The Yuan’s design apparently provides Chinese authorities with exceptional oversight over money flows, giving Chinese central bank a degree of control over their economy that most central banks do not have.
The project is designed to protect China’s capital borders in the face of fears that crypto could ease unlawful cash flows.
Authorities in China have hinted that the launch of the Yuan will counter Facebook’s Libra, which they view as a threat to the sovereignty of China and other emerging economies.
The head of the Chinese central bank’s digital currency research institute, Mu Changchun, insisted that governments and central banks should only issue digital currencies.
“Just imagine, if we acquiesce, that yuan can be converted into Libra, there will definitely be a massive currency exchange, triggering yuan depreciation.”
He also added that China would likely be the first country in the world to issue sovereign digital currency.
Other Central Banks Are Following Suit
An anonymous survey by the Bank for International Settlements in early 2019 showed most of the global central banks are participating in theoretical and conceptual research.
A good example of this is Sweden’s Riksbank announcement last month that revealed the bank had started plans to build a pilot platform for a new digital currency called e-krona.