Digital Currency: China Reveals Plan to Launch its Own Digital Currency
China's central bank, The People's Bank of China, announced on Wednesday that China will move forward to create its own digital currency. The central bank also held a conference on digital currency in Beijing where the government, along with the central bank and other top banks and institution discuss the framework of the possible new currency system. In fact, a special team in the central bank is already assigned the task to examine domestic and global understanding and experience with the digital currency.
According to CNN, the China's central bank stated that it has been studying about digital currencies since 2014. The bank also reviewed the proper implementation they would possibly apply to the country, as well as the technology and relevant legal issues. However, the bank has not specifically stated the timeframe of this plan yet, also how the system would work in relation to its existing paper currency.
The digital currency could benefit the financial system in China for various reasons. For one thing, digital currency costs less to make and distribute compared to paper currency. The use of digital currency could also boost transparency and cuts money laundering and tax evasion, as reported by the Sydney Morning Herald. Digital currency could also support China to digitally record and track its massive capital outflows.
Previously, the existence of digital currencies has been brought to light with the rising popularity of Bitcoin in recent years. As a cryptocurrency, Bitcoin has implemented anonymity whereas users don't have to reveal their identity in transactions. Due to some security risks and other factors, many countries have banned the use of Bitcoin under their financial regulation.
China responded to the controversy with a prohibition for its financial firms including banks to use bitcoins in transactions. However, private parties are allowed to hold and trade bitcoins. According to The Diplomat, Bitcoin gained more popularity in China in 2013 after Baidu, China's main search engine provider, agreed to accept Bitcoin as a payment method for services.
Recently, Bitcoin has been facing some problems. Its stock shares dropped after one of its developers declared publicly that Bitcoin is a failure and the problems it is facing can't be solved in the foreseeable future.
China's authorities, especially the central bank, is developing a system that will tackle the potential risks of having digital currencies, including security risks. They are also counting on the digital currencies for the benefits, such as digital track-recording, transparency, and reduction of transaction costs. The process, which has already begun in 2014, is still going on, although the timeframe remains unknown.