China’s forthcoming digital renminbi is unlikely to use blockchain, considers Ethereum co-founder and ConsenSys CEO Joe Lubin.
“There’s no real reason” for China to make use of decentralization
As reported, China’s digital legal tender — or central bank digital currency (CBDC) — will be controlled by the PBoC and officials have said they expect the asset to “have lots of positive impacts, including tracking the money flow in economic activities and supporting making monetary policy.”
Lubin told CNBC that while the principle of decentralization in blockchain is used to establish trust:
“China is probably not interested in that aspect of blockchain. They will, I believe, bring a digital RMB to China that makes use of some of the cryptographic primitives of blockchain technology but there’s no real reason for China to make use of its decentralizing aspects.”
Lubin noted that should the system be designed to be operated by multiple actors, not just the central bank, it’s possible there would be advantages for its creators to implement the “ fuller aspects of blockchain.” However, “it’s probably just about the digital, not the decentralized aspect,” he said.
CBDC will be used to maintain existing control
As to whether the forthcoming CBDC will bolster the authorities’ capacity for policing and centralized oversight of capital flows, Lubin downplayed the idea, arguing that:
“I think the central bank and the government have very significant control already. My guess is that it will be used to maintain the control that they have but also to potentially enable interoperation between more public and global systems.”
This summer, Yang Dong — director of the Research Center of Finance Technology and Cyber Security at Renmin University of China — told reporters at the CPC-owned English-language news portal China Daily that the CBDC was being tested for non-governmental and cross-border applications.
PBoC Deputy Director Mu Changchun revealed in August that the CBDC will be structured as a centralized, two-tier system, with the PBoC at the top tier and the second tier controlled by domestic commercial banks.
Late last month, the vice-chairman of Chinese economics think tank, the China Center for International Economic Exchanges, said he was confident the PBoC would win the global race to become the first central bank to launch a CBDC.
The Standing Committee of the 13th National People’s Congress in China passed a new law regulating cryptography on Oct. 26 due to take effect on Jan. 1, 2020. The new regulation has been rumored to be part of preparations for the forthcoming currency.