Facebook’s Libra announcement shook the world of traditional banking. The threat of a non-governmental currency threw several projects into overdrive. Chief among them was China’s national cryptocurrency project. Known as a Central Bank Digital Currency or CBDC, the currency will replace the traditional Chinese yuan. Development on the new system began in 2014. At the time, cryptocurrency remained a niche industry – 2017’s rally catapulted digital currency to the forefront.
Now, the benefits of digital currency are more than undeniable – they’re inevitable. Countries that fail to adapt may find their national currency completely obsolete. This spurred both the Chinese currency and the Bank of England’s stance on Bitcoin. Other countries, such as Venezuela, have adopted cryptocurrency out of necessity due to rampant deflation. In opposition, several countries have banned – or are attempting to ban – cryptocurrencies entirely.
The Sparse Details of China’s Cryptocurrency
China’s track record with cryptocurrency is understandably spotty. The People’s Republic of China does not allow businesses to operate without government involvement. As such, an anonymous form of currency is anathema to their standard operating procedures. The national cryptocurrency will not be anonymous or decentralized.
The Chinese CBDC involves eight of the largest national banks. Their involvement will ease integration into the general economy. Large scale Chinese businesses will be the first use case of the currency. Included in this list are giants like Alibaba and Tencent.
The Overall State of Cryptocurrency in China
While the government of China frowns on cryptocurrencies, the average citizen does not. China is one of the largest markets for the cryptocurrency industry. Friction between the PRC government and cryptocurrency resulted in their outright ban of Initial Coin Offerings. The ban came into effect at the height of the ICO craze.
More recently, China has looked into the possibility of banning Bitcoin mining. The sheer scope of mining in China disrupts some aspects of the national electrical grid. Several of the largest mining firms in the world operate out of China, including industry leader Bitmain. As the release of the government currency grows closer, pressure on other cryptocurrencies will increase. China will almost certainly seek to limit access to currencies not directly under their control.
Article By: Adam Stone