Qian believes an area that needs more research is around privacy or the balance between digital identities, privacy issues, compliance, and social governance. However, it is backed 100% by central bank deposits. The currency itself is a liability of the state-owned bank that issues it, not the central bank. “We look forward to controlling the key to cryptocurrency rather than taking a detour,” he said.Īs has been previously noted by the central bank’s former governor, China views its eCNY as a synthetic CBDC. China started with an account-based CBDC as a pragmatic choice given the level of immaturity of the technology. But in Qian’s view, it doesn’t need to be an all-or-nothing relationship. Hence he suggested the central bank start with simple smart contracts and gradually expand on the condition they’re fully secure.Īnother design feature seen as mutually exclusive is the choice of an account-based digital currency versus token-based. However, he referred to smart contract ‘disasters’ experienced during early experiments but put that down to a lack of maturity. And if the advantages of ‘digital’ are to be used, the future digital currency will definitely move towards smart currency,” said Qian. “In my personal opinion, digital currency cannot be a simple simulation of physical currency.
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In a separate part of his speech, he touched on smart contracts. He also observed that this could help reach those without bank accounts as part of a financial inclusion drive. “We can imagine that if the central bank’s digital currency runs directly on blockchain networks such as Ethereum and Diem, then the central bank can use their BaaS services to directly provide the central bank’s digital currency to users without the need for intermediaries,” said Qian. However, he doesn’t believe they’re mutually exclusive, much like taxis and buses are different modes of transport. Qian then talked about CBDC designs noting that currently, the two-tier system with a central bank issuing a CBDC via commercial banks is a popular route around the world. dollar’s currency status is “not necessarily the goal of CBDC.” Instead, Qian noted that it’s more a “natural evolution of the digital process and market selection.” CBDC designs – perhaps on a blockchain He went on to say that weakening the U.S. Qian said, “The People’s Bank of China was one of the first central banks that responded to the ‘Wake-up Call’,” and took action. The reduction in cash as a result of the two dominant private payment providers and the rise of decentralized digital currencies were a “wake-up call”. Hence the CBDC motivation is to provide an alternative to WeChat Pay and Alipay. The other main transactions by the two big wallet providers are those touching banks processed by NetsUnion Clearing, which the People’s Bank of China set up. UnionPay is China’s answer to Visa and Mastercard, but state-owned.
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Ledger Insights previously reported that barcode payments via WeChat Pay and Alipay wallets were required to be cleared via UnionPay since 2018, giving the central bank oversight. “In fact, third-party payment technology can already enable the transparency of all real-time transactions,” said Qian, who is currently a Director at the China Securities Regulatory Commission (CSRC) as reported in Sina. Helping the government to monitor real-time transactions was not the motivation behind the digital yuan, observed Qian. Powell said that the Chinese government would use the digital yuan to watch all payments in real-time. Part of Qian’s speech was a rebuttal of comments made by Federal Reserve Chairman Jerome Powell at the end of April. As he’s no longer working at the central bank, the executive highlighted that his views were personal ones. And he reaffirmed that the eCNY is a synthetic CBDC. He also observed that a central bank digital currency ( CBDC) such as a digital yuan could additionally operate on blockchains such as Ethereum and Diem. The former leader of China’s digital currency research through to 2018, Yao Qian, commented that the purpose of a CBDC is not to monitor payments because it can already do that.