China’s central bank stresses its central role in new sovereign digital currency
- Fan Yifei, deputy governor of China’s central bank, says the main aim of the digital yuan is to defend the state monopoly on creating money
- The People’s Bank of China official did not provide a timeline for the launch of the currency
China is developing a sovereign digital currency with the primary goal of defending the state’s monopoly on minting money, meaning the central bank will play a central role in the issuance and circulation of a digitised yuan, a deputy governor at the People’s Bank of China (PBOC) has written.
PBOC deputy governor Fan Yifei published an article in the bank’s Financial News newspaper arguing that creating money was the sole responsibility of a central bank and China’s digital currency will fall under its “centralised management”.
The comments show Chinese authorities will maintain full control of data about issuance, circulation and transactions of the digital yuan.
Allowing a central authority to monitor digital currency runs counter to the principal of decentralisation that underpins cryptocurrencies such as bitcoin, which allow anonymous transactions and shield users from changes in central bank policy.
However, Fan warned that cryptocurrencies and global stablecoins such as Libra challenge central bank authority in minting money.
China’s digital currency, which is under development, aimed to prevent “the loss of money minting power in the digital era, and to ensure that currency issuance always serves overall national development and reform”.
China’s central bank has cracked down on trading cryptocurrencies, viewing them as a source of financial instability. At the same time, it has worked for years to develop a sovereign digital currency with a number of large state-owned banks.