China’s biggest bank says Bitcoin is driving its efforts in this key area

An official of the People’s Bank of China (PBoC), the country’s central bank and chief financial regulator, said yesterday that the burgeoning Bitcoin space was one of the reasons behind the resurgence of the country’s own digital currency plans.

“This (the interest in CBDCs) may also be related to the large increase in the price of Bitcoin,” said PBoC research head Wang Xin, referring to the heightened efforts in developing a digital currency.

Xin, however, added that the fast pace of development was also related to “more and more central banks in the world participating in the development of domestic digital currencies.”

Strong public reviews

China’s digital yuan, officially the Digital Currency, Electronic Payment (DCEP), is one of the forerunners among all state-backed digital currencies and is in the advanced stages of its development cycle.

It saw a limited release last year across small towns and cities in grocery stores, real estate, delivery and ride-sharing apps, and in small ‘cross-border’ tests to check its viability. The currency was even ‘airdropped’ to some citizens for them to get accustomed to a newer type of money, an event that was reportedly received warmly.

The currency saw transaction volumes of as high as $300 million in the first few weeks after its tests, proving to be a successful pilot and cementing its ethos.

People’s Bank of China (PBOC) sees it as a way to advance cashless payments. It is effectively a digital version of fiat currency. The central bank has been working on a digital currency since 2014.

Inspired by, but not Bitcoin

China’s version, while being somewhat inspired by Bitcoin, has some key differences compared to DCEP. The latter is not based on a public blockchain nor is decentralized, instead of existing as a mere digital version of fiat money on a state-owned server.

There are some limitations on its usage as well. Chinese officials said last year that all transactions above $14,000 would be censored and scrutinized if caught on the system, a move that’s unlike using Bitcoin (one can transfer billions of dollars worth of the cryptocurrency without any permissions or scrutiny).

Meanwhile, Xin said market interest in the digital yuan is “very strong and everyone is paying close attention.” The country intends to launch the new currency before the Winter Olympics in Beijing next year and seems to be on track so far.

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