China’s digital currency, which was reported to be launching as early as November 11 earlier this week, may take time. A research team from the world’s biggest crypto exchange, Binance, found that the Chinese central bank does not appear to be very committed to it. The currency does not have a technical roadmap yet, making it difficult to achieve a November 11 launch.
China has ambitious plans for the coin. In a Forbes interview earlier this week, an official from People’s Bank of China (PBOC) said that it would help in the “internationalization” of Renminbi, China’s currency. Another investor in the cryptocurrency it would help China “integrate” more closely with the rest of the world.
A “Money Flower” Model That is Yet To Bloom
The report provides important details about the proposed Central Bank – backed Digital Currency (CBDC). For starters, it is based on a “Money Flower” model of tiered banks. PBOC will be responsible for its issuance and redemption while commercial banks, who form the second layer, would take care of redistributing it to the general population. It will also have 1:1 backing, each digital coin backed by a fiat equivalent.
The digital coin would be “loosely-coupled” to the existing finance infrastructure, meaning that even people without bank accounts or ineligible for credit will be able to transact using the digital currency. This will help the Chinese government reach out to its unbanked population and integrate them within the mainstream economy.
But the central bank is yet to establish a plan to facilitate cross-border payments, Binance’s report states. Researchers at the exchange also found that there was a risk of financial intrusion for users, meaning they could be hacked. Access to transaction records of users through a digital currency will also multiply the government’s power. China has already been criticized for shaming debtors.
The country announced its plans for a cryptocurrency soon after the Facebook Libra project was announced. Work on the project had been going on since 2014 but accelerated after the Libra announcement, the Binance team wrote. Specifically, the project received the green light in July this year, approximately a month after Facebook announced its blockchain and cryptocurrency. The delay between ideation and implementation occurred due to the Chinese government’s concerns that capital outflows could weaken its local currency.
But progress on the digital currency has been relatively slow in the last two years and the Chinese government has not included it in this year’s work report, the report states. Furthermore, the report mentions that there has been no announcement of a testing phase for the digital currency.