Amid China’s bitcoin mining crackdown, its central bank is exploring using blockchain for the nation’s digital currency e-yuan. Also, the central bank reveals its plan for the e-yuan trial in the 2022 Beijing Winter Olympics!
Since 2019, the People’s Bank of China (PBoC) has launched multiple trials of digital renminbi (DC/EP) across the country. The e-yuan trials cover Beijing, Shenzhen, among other cities, with a total transaction volume of 56 billion yuan.
For the first time, Gang Di, deputy director of the PBOC’s Digital Currency Research Institute, expressed support for the blockchain application in China’s financial market. According to China’s 14th Five-Year Plan, the government will nurture emerging digital industries such as blockchain and big data. Also, blockchain technology can drive the development of digital financial services in the country, according to Di.
Moreover, Gang Di lists potential blockchain applications in China. They include cross-border payments, security trading, foreign exchange transactions, and even agricultural financing.
Basically, e-yuan is a digital currency issued by the PBoC. Users can store and pay e-yuan via a mobile, digital wallet. E-yuan has the same functions as the physical yuan, with its value backed by the PBoC. China’s residents can buy e-yuan at the Big Four banks in China. Additionally, merchants cannot decline payment in e-yuan.
In recent months, China’s government has promoted e-yuan across the country through lotteries for ‘red packets’ of e-yuan. Within a year, digital yuan will be available in Hong Kong for a trial, allowing mainland and Hong Kong residents to make cross-border payments. Meanwhile, the PBoC will make e-yuan available for international visitors at the 2022 Beijing Winter Olympics.
China’s PBoC Eyes Blockchain, L2, SideChain, and Cross-Chain Solutions?
Many countries, including Sweden, also plan to issue central bank digital currencies (CBDC). But, in terms of the trial scale, China is still leading in the digital currency race. Additionally, the United States and EU are still exploring the launch of CBDC.
In a recent speech, PBoC’s Gang Di stated that e-yuan can use “some parts of the blockchain technology”. However, unlike bitcoin (BTC), ether (ETH) and other blockchain-based cryptocurrencies, e-yuan is exclusively issued by China’s central bank. E-yuan wallets require real-name registration. Also, payments in e-yuan will be managed by PBoC’s central database.
However, PBoC believes blockchain technology is far from perfect. According to PBoC, the technical infrastructure of e-yuan is more efficient than blockchain-based cryptocurrencies. E-yuan performs better in processing a gigantic number of transactions – more suitable for China’s mass population. Moreover, e-yuan does not require the mining process, which is more environmentally friendly and reduces energy consumption.
Gang Di pointed out that the blockchain technology has its problem in interoperability. And its technical capability cannot satisfy the current need for mass adoption. China’s PBoC will actively explore the application of blockchain in e-yuan. But, Di suggests the blockchain industry to focus on sidechains, cross-chain solutions.
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