Information about a Chinese state regulated cryptocurrency (CBDC – Central Bank Digital Currency) is released almost every week, in an obvious strategy to prepare the world and the market for an imminent launch. Chinese sources claim that the Chinese cryptocurrency is ahead of Libra, which is expected in 2020.
Strengthen the intermediary
Newsagencies has published reports that China’s cryptocurrency will be distributed through banking and payment services, plus the two biggest technology companies. First and foremost, it is the three largest banks in China that will have the opportunity to exchange cash against digital currency for their corporate and private customers. Here is mentioned the world’s largest bank, Industrial and Commercial bank of China, and the second largest bank in the world, Bank of China. In addition comes the Agricultural Bank of China, secondly Union Pay which is a cooperative organization for the banks. Of the tech partners who get the first code delivered, we find Alibaba and Tencent, which have dominated the e-commerce and private money transfer market for several years.
The authorities in China have chosen to go through intermediaries so as not to tear the carpet under the feet of vulnerable banks and existing payment systems. Quite the opposite of what the decentralized cryptocurrency projects try to do. China wants a smooth transition to a digital everyday life.
Some also claim that the authorities will help state-owned banks regain control of private consumption, which in recent years has moved to new mobile payment solutions. It is the big banks that are first to exchange physical cash for digital money.
What makes China’s cryptocurrency better than, for example, Bitcoin and Libra?
According to rumors, the new cryptocurrency can handle 300,000 transactions per second. Libra can only process 1000 transactions per second. Need is of course greater in China, where there were 92,771 transactions per second on Singles Day last year.
Another advantage is that the Chinese edition will be 100% “backed” by the corresponding amount of money from the Chinese central bank. There is no guarantee that Libra will not be geared or that they will stay fully funded. Many people probably think that with today’s low interest rate regime it would be silly not to lend on the balance.
It is also speculated that the Chinese cryptocurrency will launch before Libra, which is expected in the summer of 2020. Chinese authorities have already tested the new currency in the Shenzen Special Economic Zone for almost a year.
For example, the United States has not begun work on digitizing the dollar, nor has it decided whether to actually do so.
Jeremy Allaire from Circle believes that China is now far ahead of western central banks and the digital currency will be able to circumvent US banking rules by offering direct settlement with the Chinese central bank.