China Sovereign Digital Currency ‘Essentially Ready’

China’s sovereign digital currency is “essentially ready”, a senior central bank official said over the weekend, as the country pushes ahead with virtual asset plans that compete with the likes of Facebook’s Libra.

Mu Changchun, deputy director of the People’s Bank of China, told the China Finance 40 Forum in Heilongjiang on Saturday that the bank had developed a prototype currency based on blockchain, but has now switched to a technology-neutral position, according to local reports.

A system based solely on blockchain would not be able to handle the high transaction volume necessary in China, he said.

The currency is intended to be an alternative to cash, and is to be issued on a two-tier system by both the central bank and commercial financial institutions, he said.

Dual-tier system

The system is aimed at catering to China’s “complex economy with a vast territory and a large population”, he said.

Bringing in commercial banks as issuers would improve accessibility and adoption rates by the public, promote innovation and reduce excessive concentration of risks, Mu said.

The central bank began research into issuing a digital currency in 2014, but until now has released few details of the plans.  Mu didn’t indicate when the bank might aim to issue its currency.

Facebook earlier this year announced plans to launch a digital currency called Libra that would be managed by an independent organisation based in Switzerland, but the plans have been roundly criticised by regulators and politicians in the US.

Japan has also taken a lead in regulating and encouraging the use of cryptocurrencies, as it seeks to spur economic growth.