China to develop a domestic digital currency

After banning domestic exchanges from trading bitcoin and cryptocurrencies, the People’s Bank of China may be thinking of developing a domestic currency after all. China seems to be eager to join the “cryptocurrency hype”, especially after the total market capitalization of digital currencies hit $200 billion, with the major driver being Bitcoin, which surpassed the $7,400 price level.

The major problem for China until now seems to the the decentralization and the inability for the government and bank to control the cryptos. They are now looking into ways to create a centralized digital currency, once that can “satisfy” the needs of investors and the bank’s control over it.

Cryptovest reported the words of Yao Qian, the lead researcher at the central bank:

“What the central bank have in mind is a centralised digital currency among all. As money has evolved from the barter system to its metallic and paper forms, it is now going digital.”  

There are several major benefits that the issue of a domestic cryptocurrency can bring to China including:

  • Access to financial institutions and integration of rural areas of China
  • Decrease of financial costs
  • Increase of monetary policy efficiency and scale

Implying that the digital legal tender will be a “jewel in the crown of fintech”, Yao also mentioned:

“Virtual currency is easier to trace, allowing the central bank to monitor its velocity and the whereabouts of the money and improve its monetary policies accordingly.” 

Rumors about China resuming cryptocurrency trading have been swirling around the news for two weeks now. With the comments from PBOC and the views they presented, new digital products and regulations may be expected in China when it comes to cryptos.

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