Cryptocurrencies have grabbed the attention of governments across the world, with new platforms to trade them emerging every day, such as scam robots Bitcoin Loophole and Bitcoin Future. Many countries have also established crypto projects of their own. These countries seek to harness the benefits of digital assets through their national crypto assets.
China is one of the countries that are currently in the process of developing its cryptocurrency.
The Chinese digital asset may be closer to being launched than many would have anticipated as the process to avail it to the public official has been expedited over the last few weeks.
The cryptocurrency will be issued and controlled by the country’s central bank and can be used for daily business in the nation.
Not really crypto
According to the latest developments, China says that the cryptocurrency they plan on launching will not be decentralized. The central bank-issued digital currency (CBDC) will partially make use of a distributed ledger.
Decentralization is a core principle for a cryptocurrency, and a digital asset that is not run on a decentralized network cannot be truly called a cryptocurrency.
A two tier system will be used to distribute CBDC in the country. The first tier is the People’s Bank of China (PBoC), which will issue the currency to the country’s banks.
The second tier is China’s commercial banking system, which will issue CBDC to their clients.
According to Mu Changchun, deputy director of the PBoC, the two-tier system is best for China’s conditions. The system can make use of existing resources such as commercial banks to smoothly promote and support digital currency.
It is quite clear that the digital currency being offered by China is not built in the same manner as cryptocurrencies such as Bitcoin and Ether.
The Chinese government has also made it known that they will be monitoring all transactions done using CBDC, and this adds to the fact that this digital currency cannot be classified as cryptocurrency.
It looks like China is using passive income ideas to go around their current challenges, which have come as a result of the trade war.
The Libra effect
While China was already working on its digital currency, the process was sped up after Facebook announced its intentions to launch Libra.
The Chinese government and its central bank want to beat Libra to the market and avoid having the cryptocurrency corner the Chinese market before they do.
This reaction has been seen in other countries which are developing policies and establishing projects to protect their interests against the potential that Libra has.
A cryptocurrency as significant and as widespread as what Libra maybe will affect the monetary policies of countries and this has raised concern in governments and central banks.
Commercial banks are also trying to figure out how they would fit into the new financial system if Libra becomes a success.
Facebook’s proposed crypto has the potential to do away with tradition financial systems, and banks would go out of business. Commercial banks in China will be welcoming to a national digital currency which will protect their interests from Libra.