PBoC Appears to be ‘Neutral’ Regading the Underlying Technology of its Digital Currency
After statements from Chinese President Xi Jinping regarding the possible developments of blockchain technology in the nation, a representative of the People Bank of China stated instead that the institution is neutral with respect to the underlying technology that will be used to develop the digital currency. The story was reported by Ejinsight.
Blockchain Might not be the Answer
As noted in statements released by one of the PBoC officers last week, Blockchain might not be the technology that will underline the nation’s Digital Currency Electronic Payment System (DCEP).
As per the report, the decentralized nature of the blockchain technology would not align with the monetary policies of the Central Bank. The project would have the objective of safeguarding China’s currency sovereignty offering the possibility of having direct access to a personal account on the Central Bank and thus speeding up the interactions between the participants. Which would not be possible with a decentralized structure.
These statements were made by Mu Changchun, deputy director-general of the PBoC’s Institute of Digital Currency, at the 2019 FinTech Week held in Hong Kong. Mu explained that the project was initially based on pure DLT, but scalability, network storage capacity, and interoperability problems emerged during development. These limits have led the Central Bank to opt for other solutions.
Central Banks Need Control
As already highlighted in a previous article on BTCManager, there is no real reason for China to make use of decentralizing aspects of blockchain technology. Although the goal of the project is to be able to include any Chinese citizens in the banking system, the risk is to give the government and the PBoC even more control over the freedom of citizens.
Central banks will never adopt decentralized forms of payment because they believe that government control of money is necessary for the functioning of any society, and it’s not just about decentralized forms of payment. Mu also warned other central banks from the Libra project saying that it should be under the close supervision of central banks or international supervisory organizations.
As we can see from the comments, central banks would be the only institution to have the innate skills and knowledge to manage money.