Newspaper article The Daily Yomiuri (Toyko, Japan)

China Preps for Digital Yuan Launch

Newspaper article The Daily Yomiuri (Toyko, Japan)

China Preps for Digital Yuan Launch

Article excerpt

BEIJING -- The People's Bank of China (PBC) has completed the design and development of an electronic legal currency, the digital yuan.

As Facebook's virtual currency to be called Libra is increasingly facing restrictions, China is likely to lead the way in issuing digital currencies.

Phased introduction

"The design and development work have essentially been completed," Chinese media reported a senior official at the Chinese central bank as saying Thursday in a speech, As a next step, the bank plans to select areas for trial distribution and steadily introduce the system.

Last Tuesday, former PBC Gov. Zhou Xiaochuan said in a speech that digital currencies have two goals: domestic retail settlements and international settlements.

"China will focus on retail payments and use the strategy as a basis for expanding its use," Zhou said.

To reduce the impact of any problems, the bank is likely to take a step-by-step approach toward handling international payments. Digital yuan are unlikely to invite criticism if limited to the domestic market, in contrast with Libra.

2-layer structure

According to PBC Gov. Yi Gang's remarks at a press conference and the transcripts of lectures by senior central bank officials, the digital yuan, or digital renminbi, is an electronic legal currency that has the same value as cash and will replace some notes and coins.

Digital yuan are to be supplied through a "two-layer structure" mediated by commercial banks. If the central bank provided digital yuan directly to users without going through commercial banks, financial intermediary functions such as bank financing would weaken, having a negative impact on the economy.

The digital currency will mimic the current flow of cash, in order not to undermine the effectiveness of China's monetary policy and its banking system, which operates through commercial banks. …

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