Fan Yifei, vice governor of the People's Bank of China (PBoC), revealed new information about his country's digital currency initiative Thursday. Breaking with what had unto now been the norm – official statements and press releases – the high-ranking deputy conveyed fresh details in an op-ed article about China's plans to create a central bank digital currency (CBDC).
"It is a great waste of social resources to reinvent the wheel," wrote Yifei, in a statement that seemed to hint at the overarching ideology driving China's CBDC effort.
Until now, some have speculated that China, which has been researching the associated monetary implications of such an endeavor, might go all in on cryptocurrency – phasing out the issuance of hard renminbi and moving the national currency exclusively to a blockchain.
That will not be happening – in fact, blockchain technology might move from the forefront of the Chinese CBDC conversation to a secondary consideration. According to Yifei, "In order to maintain the central bank's digital currency properties and achieve the goal of monetary policy and macro-prudential management, China's central bank digital currency two-tier system should be different from the decentralization of various tokens distribution model."
Emphasizing how China's potential CBDC would be designed to retain the PBoC's centralized monetary authority, Yifei described functionality being explored as possessing "controllable anonymity" whereby the PBoC would act as the exclusive third party to verify transaction data."
"The central bank's digital currency should adhere to the centralized delivery model. However, the centralized delivery model described here is different from traditional electronic payment tools. The transfer of funds for electronic payment instruments must be done through an account, using a tightly coupled account. Central bank digital currency should be based on loosely coupled accounts in the form of transactions so that the degree of dependence on one account is greatly reduced. In this way, it can be as liquid as cash and can be controlled anonymously."
Yifei went on to describe how the PBoC should exercise caution when implementing some of the more advanced attributes of blockchain technology, like the executable distributed code contracts of the Ethereum blockchain, and stressed the importance of avoiding "other social and administrative functions" that are not usually associated with fiat.
Yifei's commentary provides insight into how China's CBDC effort is progressing and how officials think about this issue. Apparently, China is trying to walk the line between surging into the future of digital money without rocking the status-quo boat too much.
Quotes translated from Chinese using Google Translate.