Despite the delay, the People’s Bank of China (PBC) is closer to launching its official digital currency. By working together with several large private companies, the nation’s central bank has finished the development process and is working on the proper legislation before the CBDC is released.
China’s CBDC Is On Its Way
After the COVID-19 outbreak, the Chinese central bank digital currency (CBDC) was delayed indefinitely. However, as the country is portraying initial stages of recovering after the deadly virus, a new report informed that the CBDC’s launch is closer than anticipated.
The Chinese central bank has completed the development process by collaborating with several local firms, including Huawei, China Merchants Bank, Tencent, and the tech giant Alibaba.
The latter has reportedly publicized five patents related to the future digital currency from January 21st to March 17th. The patents cover various areas of the digital currency’s future usage. Those include issuance, digital wallets, transaction recording, anonymous trading support, and assistance in supervising and dealing with illegal accounts.
Aside from all patents, the digital currency has to comply with local legislation as well. This, according to the report, could raise issues, because the currency has to operate with banking and insurance regulators on supervision. This process could be quite lengthy. Therefore, the exact time of the CBDC launch cannot be determined yet.
As the world is arguably entering the next, long-awaited, recession, most central banks are taking extreme measures to fight the economy curtail. The U.S. Fed, for example, cut the interest rates in an unprecedented manner and even announced unlimited quantitative easing.
China’s approach for stabilizing its economy might differ substantially with the digital currency launch. Cao Yan, managing director of Digital Renaissance Foundation, believes that the PBC should accelerate the development of the CBDC.
He outlined two main merits; firstly, it would establish China’s leadership position in this new digitally-oriented world. Secondly, a CBDC could be more efficient during times of uncertainty than simply lowering rates.
“If there is a chance China is considering lowering its interest rate into negative territory as a final option and directing such policy to commercial loans and lending, a circulated digital currency rather than M0 will be able to achieve that.” – he explained.