When the deputy director of the People’s Bank of China (PBoC) stated in August this year that the central bank’s digital currency (CBDC) may launch as early as November, many did not believe his claims. However, with several new rumors and Xi Jinping’s recent announcement concerning blockchain technology, it seems likely that China will be the first nation to introduce a national cryptocurrency.
Despite the negative sides of having an authoritarian regime, Chinese citizens benefit from being able to massively adopt the newest technologies, as well as living in an environment where changes are swift. Now that the central government clearly stated its focus for funding the development and integration of blockchain technology, it seems likely that the announcement was made to softly introduce support for the disruptive technology.
These past events combined with a recent speech made by Huang Qifan, the vice-chairman of the China Center for International Economic Exchanges, make it clear that the PBoC is not only likely to introduce a CBDC during the next month, but that it will be the very first official institution to launch a usable digital currency.
Speaking at the Inaugural Bund Financial Summit of 2019 in Shanghai, Huang commented on the inefficiency and costly structure of traditional payment systems such as Swift. Moreover, he stated that cryptocurrencies such as Bitcoin and Libra should be adopted and not pushed away, despite his belief that Libra will not launch successfully.
More interestingly, Huang did not only comment on the current state of traditional financial systems and the benefits that cryptocurrencies and blockchain technology could bring, but he also made a mention concerning PBoC’s own cryptocurrency. ‘The People’s Bank of China has been studying DCEP (digital currency electronic payment) for five or six years, and I think the technology has matured. The PBoC is probably the first central bank to introduce digital currency in the world.’
China to introduce a new regulatory framework in 2020?
Slowly falling into one place, China’s central government and central bank seem to make their developments concerning blockchain technology and cryptocurrencies at the same time. Based on information from Chinese national news, The Standing Committee of the 13th National People’s Congress in China introduced and approved a new regulatory framework that will take effect starting from the 1st January 2020.
The regulatory framework focuses on cryptography and password management. Moreover, a central cryptographic agency will issue legislations, lead public cryptographic work, and create guidelines for the industry. While the framework does not explicitly mention cryptocurrencies, it still focuses on one of the key elements that make the foundation of the new digital asset class.
Based on the previous events that recently took place, Xi’s blockchain speech, new cryptography law, and the PBoC’s imminent cryptocurrency launch, China is one of the most progressive countries in terms of blockchain adoption in the world. If the political situation continues to support the industry, we may as well see a different stance concerning cryptocurrencies, which face regulatory scrutiny.
The cryptocurrency market enjoys the financial support of a significant portion of Chinese investors, who are forced to interact with the market through over-the-counter (OTC) and peer-to-peer (P2P) exchanges, as normal cryptocurrency exchanges are banned in the country. If the central government changes its mind on this matter, the crypto sector may experience a revival.