The Futurity of The Digital Form of Currency in China

The Central Bank of China has released information saying that China will most likely be releasing “digital currency” soon. They are looking into using this digital currency in lieu of paper because it costs less than printing, promotes trade, and could minimize the probability of tax evasion and money laundering. The concept was created back in 2014 by the People’s Bank of China (PBOC) and they have been studying its possible use by observing and testing how it would work locally and globally. Although the central bank is excited to instate this currency it may be hard to convince the Chinese citizens to use it. They are usually conservative and it would be a big change to move all their money into a brand new intangible economic system. This idea of digital currency is partially in response to and an idea drawn from the Bitcoin which is still a permitted currency in China.

Recently, there has been new updates circling the prospect of digital currency provided by the Chinese government becoming legitimized. In mid February the PBOC revealed that they are definitely going to implement a cryptocurrency that they have made themselves. They will make sure to encrypt its money to regulate how money is transferred and what it is worth. They propose that the new cryptocurrency will be easier and more convenient to use, enhance the PBOC’s ability to control money circulation, and the money supply.

In an interview with governor Zhou Xiachuan, he states that the currency would be used in “mobile payments, cloud computation, secure chip and blockchain tech” to make the new monetary network (Rizzo). However, they are not yet sure about the blockchain tech as it is currently inefficient in the resources needed to make it work properly. Also, the new currency will have improved privacy over things like Bitcoin. Bitcoin transactions are visible within a blockchain, and addresses are blocked fairly well through a complex system, however it has not proven to be the most secure. They plan on accomplishing the creation of this cryptocurrency by working with people in the financial and tech industry to make sure they can come out with it quickly and make sure that there are little to no bugs, and that they are squashed rapidly if they do occur.

One major concern with this new currency, however, is that there could be major issues regarding the current raining digital currency, which is Bitcoin. Up to this point, China has taken a very soft approach in regard to Bitcoin in not really applying many regulations to them. They have let them act freely within China and now it is a very large part of the Chinese market. Bitcoin China does not actually charge any trading fees and they do not have any fees on spending internationally. This enables people with a lot of Bitcoins to trade with people in other countries without fees which makes China lose out on money that would usually be coming in.

As for when the new cryptocurrency will come to China, there is nothing confirmed. It will definitely be slowly transitioned into the economy however, and will likely not completely replace paper currency. It will come to smaller areas and slowly grow across china over years. For the foreseeable future, this slow crawl will creep across China and will coexist with paper currency and slowly overtake it with incentives to use digital over paper currencies.

This is the first time a country has attempted to make its own digital currency and it is a very big deal. Since this is basically a pilot test run it could be the gateway into many more countries going towards this as a viable method to run an economy. It could very well start a revolution in digitizing countries’ economies, efficiently changing the way we all do business and deal with each other internationally.