Top Institutions to Receive China’s Digital Currency First
Sources confirm that China’s central bank will launch its digital currency, and issue the first round of the state-backed cryptocurrency to eight top institutions. They include Alibaba (the online retail giant), Tencent (the internet behemoth), five banks and one unknown entity.
The first beneficiaries
Paul Schulte, who until 2012 worked as the head of the China Construction Bank, said the first to receive China’s Digital currency are Tencent, Alibaba, China Construction Bank, Chinese banking association Union Pay, the Industrial and Commercial Bank of China, and the Agriculture Bank of China.
A separate source (who chose to remain anonymous) involved in the development of the cryptocurrency confirmed that the seven named institutions would be receiving central bank digital currency (CBDC) first when it launches.
The anonymous source, who previously worked for the Chinese government, added that an eighth organisation could also be among the first entities to get the digital currency. The source declined to reveal the name of the eighth institution.
Additionally, the unnamed source confirmed the technology behind the cryptocurrency is ready, and the new digital currency could launch as soon as November 11. The eight institutions will be responsible for dispersing the cryptocurrency to China’s citizens, as well as others doing business in the renminbi (China’s fiat currency).
The source further said that China’s Central Bank looks forward to eventually make the digital currency available to buyers in the United States and elsewhere, but not right away.
The two-tiered strategy
Mu Changchun, the deputy director of the People’s Bank of China (PBoC) payment and settlement division made things even more evident by revealing the two-tiered system that China’s Central Bank will leverage on to disperse its digital currency.
According to Mu, the upper layer of the two-tiered system is the People’s Bank of China and the second layer is the commercial organisation. The central bank will create the digital currency, and the commercial organisations will distribute it.
Why the two-tiered system?
Mu gave several reasons for adopting the two-tiered system.
First, it’s a lot easier to reach the whole country through the already existing banking network than if the central bank were to do it all alone. As massive as China is, the best way to encourage the use of the digital currency once it’s made available is to introduce it in a way that people are used to.
Mu said, "If a single-tier operating structure is adopted, it means that the People's Bank must face all the public alone. In this case, it will bring great challenges."
Another reason to use the two-tiered system is to avoid financial disintermediation. This is to ensure commercial organisations don’t feel left out and continue to compete for excellence.
The third reason is the two-tiered system is used to "to resolve risks and avoid excessive concentration of risks."
“This dual delivery system is suitable for our national conditions,” he further said, “It can not only use existing resources to mobilise the enthusiasm of commercial banks but also smoothly improve the acceptance of the digital currency.”
Libra and China's Digital Currency
Later in his Speech, Mu said, "To some extent, Libra's organisational structure is quite similar to the structure designed by the PBOC for its digital currency and electronic payment system.”
Mu clarified that only after the technical specifications of the new digital currency were completed in 2018 did the central bank realise the similarity between its design and Facebook’s Libra.
As the race to the finish line continues, China seems to be on the forefront to availing its digital currency to its citizens and the world. If all goes well then November 11th, Singles Day, which is China’s largest shopping holiday, may well be the date to watch.
About the author:
Jay Jackson is a blockchain enthusiast and a freelance writer at topcryptowriter.com. He works closely with brands (people, businesses and startups) in the crypto sphere. He currently writes Blog posts, Guides, Press releases, ICO reviews, eBooks & Whitepapers. You can find him on LinkedIn.
The above references an opinion and is for informational purposes only. Do not take this as personalised financial or investment advice. The views expressed by the author do not necessarily represent the opinion of BitPrime.
Last updated: 29/08/2019