Since the conversation around the creation of Central Bank Digital Currencies has come more and more to the fore, with a number of key banks looking to take their next steps, so have eyes been on China and its progress.
China, despite banning all cryptocurrency, has embraced blockchain technology and go so far as to work on creating its own central bank digital currency. China is certainly in the lead for launching such a blockchain token, but their creation will be unlike anything expected in crypto, and by central banks.
The CBDC being presented by China has of course been described as totally different to Bitcoin or any other such speculative and decentralised token, but it also appears that China will not be following the global trend on CBDCs.
Despite China being a world leader in testing its own digital sovereign currency, the People’s Bank of China has been conspicuously absent from international group discussion. The nascent digital Yuan has not been officially rolled out, but it continues to be tested in ongoing pilot programmes across China.
Not going global
Part of the reason that Central Banks are looking towards digital currencies is because of the globalisation of the world and the move to more digital payments. This also infers international cooperation.
A working group was formed by the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, Sweden’s Riksbank, the Swiss National Bank and the US Federal Reserve, along with the Bank for International Settlements (BIS), all of which are said to share a common motivation – avoiding unintended barriers for transferring sovereign currencies in their electronic forms.
However, China is not taking part in this shared objective, as reported by the South China Morning Post.
“It seemed a sensible group to put together because we have a common platform of like thinking. We face similar environments, we have similar financial-sector structures, and a number of us have been working together,” Jon Cunliffe, deputy governor of the Bank of England, said during an online press conference.
“A central bank digital currency could be an important tool for central banks to help them meet their public policy objectives,” he added.
“China is likely to consider cross-border digital yuan transactions, because the US-China trade war has pushed Beijing to develop its own payment system for global trade and investments, accelerating its efforts to internationalise the yuan, and thereby reduce China’s reliance on the US dollar payment system, Sky Guo, founder and CEO of New York-based blockchain company Cypherium, said.
“There are differences with the digital yuan, because China wants to develop its own system, independent of the current payment system dominated by the US dollar,” Guo said. “It should have its own development path and its own financial system.”