China Great Wall Big deal. No, not that kind of big deal, I mean a SARCASTIC ‘big deal’. The PBoC (People’s Bank of China) is creating a digital currency and we all know many other central banks are working on the same thing. Think about it, they are just replacing paper money with digital money in order to better track where people spend (and more) and retain control of the money supply, capital outflows, etc. There are obvious benefits (cost savings, transparency, speed, etc) but the ability to track and monitor money flows is a certain way to keep control of its currency. Easier for consumers, more control for government. (Bill Taylor/CEO) China’s central bank is going digital.

After assembling a research team in 2014, the People’s Bank of China has done trial runs of its prototype cryptocurrency. That’s taking it a step closer to becoming one of the first major central banks to issue digital money that can be used for anything from buying noodles to purchasing a car.

For users transacting over their smartphones or laptops, a PBOC-backed cryptocurrency probably wouldn’t seem much different to existing payment methods such as Alipay or WeChat. But for sellers, they would get digital payments directly from the buyer, lowering transaction costs as the middleman is cut out of the process.

At the same time as it builds up its own capabilities, the PBOC is increasing scrutiny of bitcoin and other private digital tenders. It doesn’t want a bitcoin bubble to blow up. And since currencies have historically been issued by the state, not private players, it doesn’t want to cede the cryptocurrency space to companies it has no control over.

Chinese people have embraced online payments for just about everything. To buy a can of Coke, thirsty commuters scan QR codes on their smartphones rather than feed coins into a vending machine. At Lunar New Year gatherings, money is exchanged via a few presses on a smartphone instead of crisp notes handed over in red envelopes.

All of that poses a challenge to the PBOC’s status as the central bank of both the digital and physical realms. So if you can’t beat them, join them....

Read Full Article at Bloomberg