Over a month ago, speculation abounded on whether China was developing its very own cryptocurrency to essentially digitize RMB. Now we know quite certainly that the Central Bank of China has developed and is currently testing a cryptocoin.
Planned Integration with Commercial Banks
Although there have been no official statements from China, according to several reports online, the People’s Bank of China has been slowly testing its cryptocurrency through mock transactions between commercial banks within the country. The plan would be to eventually launch the digital currency alongside China’s primary currency RMB (aka yuan). Some of the key benefits of having a fiat cryptocurrency for China include: making it easier for people in more rural areas that don’t have access to traditional banks to receive financial services which would in turn lower transaction costs; greater oversight over other digital currencies like Bitcoin and Ether; as well as the reduction of corruption, fraud, and counterfeiting. Yao Qian, the Deputy Director of the Science and Technology Department at China’s central bank recently authored an extensive report detailing many of the ways China could benefit from digital currencies.
One of the fears highlighted by some experts is the fact that by having a central digital currency, commercial banks could be undermined and lose customers. China’s goal, though, is to integrate the digital currency into the existing banking system by allowing commercial banks to operate cryptocoin wallets for the central coin. The mock transactions between commercial banks would be a good place to test the planned integration.
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Cryptocurrency as a Tool
Cryptocurrencies have been making headlines recently; mostly on account of the extreme volatility involving the price of coins like Bitcoin and Ether as well as the many Initial Coin Offerings (ICOs) that have raised ridiculous amounts of money within a few hours and even minutes. With much of the news focused on only one aspect of the cryptocoin market, it’s easy to lose sight of the technology’s many other uses. The central idea behind cryptocurrencies is decentralization; allowing people anywhere in the world to transact instantly with zero transaction costs.
The fact that a country as large as China is developing and prototyping a cryptocoin, even though it will likely be controlled and restricted by the central government, speaks volumes to the technology’s potential. China is not the only one getting involved, however. Last month, Singapore made headlines as well when it announced it had successfully digitized its currency. Canada, England, and Russia are also experimenting with cryptocurrencies. Hopefully, more countries will follow suit.