Well Howdy! Just the other day FintekNews ran a story (probably still on the home page) about how the IMF is ‘nudging’ global central banks to look at digital currencies – IMF Urging Central Banks to Consider Digital Currencies & Blockchain. Yeah well, looks like the PBoC (Peoples Bank of China) is already way out in front of all that chatter. China is already testing a digital currency and plans to issue it alongside the Chinese Yuan sometime in the future. Boy, tough to sneak up on the IMF (like China did) but hey, its a step forward.
“According to a paper published in the academic journal Tsinghua Financial Review and online, the People’s Bank of China (PBoC), China’s central bank, is currently testing its own national digital currency with fake transactions between it and some of the country’s commercial banks. Since the central bank is seemingly proceeding with caution there is no set timetable for the deployment of the currency, and its plan, according to officials, is to issue it alongside the Chinese Yuan.
The issuance of a national digital currency would have ‘‘practical and far-reaching historical significance.’ According to MIT’s Technology Review, there are numerous advantages in it, as a national digital currency would lower the cost of financial transactions, further increasing the reach of financial services, to millions of unbanked people in China. Plus, it could help reduce fraud and increase transparency.
Furthermore, it could improve the central bank’s control over money in circulation and digital transactions being made, which could also help reduce corruption, as these would be traceable. Adding to all that, policymakers could have real-time economic insights, which would help them act before problems arise.
China’s isn’t the only central bank looking to develop a national digital currency. The Bank of England, the Bank of Canada, and Deutsche Bundesbank are among those who have been studying digital fiat currencies for a while, even though China seems to be ahead of the rest of the world.
Most central banks believe a national digital currency will undermine the commercial banking system due to the possibility of having an account with the central bank. China’s plan, however, is to integrate the digital currency into the existing banking system, by allowing banks to operate digital wallets for the central bank…”