According to the document, originally the project was response to cryptocurrencies, such as Bitcoin, in a new world context with a digital economy. Couple years ago, the only about half of people were using cash in China. People started paying for things via mobile payment services such as AliPay and WeChat Pay, a poll conducted by the financial institution shows.
According to the survey, 46% of the participants used no cash with digital and mobile payments accounting for over half of the transactions conducted during this period. Now that there was a clear change in the citizens’ payments habits and preferences, the PBoC could re-allocate the resources normally used in cash management to be employed for other sectors.
The Chinese government views digital assets, such as Bitcoin, as speculative instruments, tools to gain anonymity, and to be used in illegal activities. The government believes that BTC, ETH, and others, “lack intrinsic value” and can’t be used as currencies.
The Chinese central bank started the e-CNY project to launch a digital version of a fiat currency run by “authorized operators”. The CBDC will work as a hybrid payment instrument with legal tender status.
The central bank explained that the e-CNY will have the “basic functions of money” (unit of account, medium of exchange, store of value).
“The issuance and circulation of e-CNY is identical with physical RMB, while the value of the former is transferred in a digital form. Thirdly, e-CNY is the central bank’s liabilities to the public. Backed by sovereign credit (…).”
In the white paper, PBoc revealed some of the CBDC’s main features, such as smart contracts, private transactions, and clarified that the digital currency will co-exist with the physical form of Yuan.
The e-CNY white paper also comes with a number of statistics and defining characteristics that make it different from the likes of bitcoin (BTC) and stablecoins. The paper claims more than 20 million digital yuan wallets have been created thus far, and $5.4 billion or 35.5 billion yuan has been settled on the e-CNY network.
Smart Contracts And China’s CBDC
According to the central bank their CBDC will be able to carry out automatic payment transactions. Similar to a smart contract on a private blockchain, e-CNY can make transactions once certain conditions are met.
China is driving new business models and promoting future innovation. In term of privacy, the digital Yuan will have controllable anonymity and users will be able to keep part of their data hidden from other, but the PBoC will hold complete supervision.
The white paper states that the CBDC has successfully completed its top-level design, function development, and system testing. As such, the PBoC has been able to move to a system testing phase in “representative regions”.
An official rollout date for the e-CNY has not yet been decided or at least announced. The central bank still needs to determine the level of privacy of the transactions, but many speculate on the possibility that the CBDC will be a big part of the Beijing 2022 Winter Olympics.
China’s digital Yuan has received criticism. Many fear that the e-CNY will be used to excess further control on the country’s population and gain more control over their financial independence, which isn’t really ‘China only’ issue.
A founder partner at Primitive Crypto, Dovey Wan, believes the launch of the digital Yuan or e-CNY will mark the beginning of a conflict between two sides. One could be represented by Bitcoin and BTC holders, the other by e-CNY users.
“The fight between absolute sovereign power vs most robust meta sovereign power will mark the start of a major upheaval in our monetary universe.”
Source: China Release White Paper on CBDC: $5.4B Settled, Smart Contracts Enabled – Fintechs.fi