The former governor of the People's Bank of China and current deputy governor shared the central bank's plan for the digital RMB.
Zhou Xiaochuan, the former governor of the People's Bank of China, at the Boao Forum for Asia. Photo
By ZOU Luhui
Last week, the former governor of the People's Bank of China (PBOC) ZHOU Xiaochuan and current PBOC deputy governor LI Bo attended the Boao Forum for Asia Annual Conference 2021 to share the central bank's plan for the digital RMB and approach to crypto-assets.
Li said pilots of the two-tier system of the central bank's digital currency appeared to be working. The central bank issues Digital Currency Electronic Payments (DCEP) to commercial banks and the commercial banks provide DCEP services to the public. No timetable has been set regarding the nationwide use of the digital RMB.
Digital currency has controllable anonymity. "Our system anonymizes small transactions; larger transactions can be tracked. It can be linked to both the banking system and the token system. This way, we have different degrees of coupling in different technical solutions."
Before national use, the pilots will be expanded. A test run at the 2020 Winter Olympics will allow use by international visitors. A lot of work remains to be done on corresponding legal and regulatory frameworks for the currency.
Zhou described some of the difficulties involved in the internationalization of the currency. At present, the world system is based on central banks and national monetary systems, where each country has its own macro-control and currency sovereignty. The exchange rate system also varies from country to country. Globalization of a digital currency shouldn't bring the whole world under its domination and sovereignty of central banks must be preserved. Currently, the biggest demand for digital RMB is domestic, demanding an upgrade to the retail system.
The PBOC is a member of a central bank digital currency group which includes Hong Kong, Thailand, and UAE, exploring ways to make digital currencies work together.
"Interoperability is a very complex issue, and we are not in any hurry to solve," Li said.
The boom in cryptocurrencies has brought central bank scrutiny into the spotlight. Li described Bitcoin as a crypto asset for alternative investment, not a currency.
"We expect crypto-assets to play a major role in the future as an investment tool or alternative investment,” Li said. Many countries are working out how to regulate such an investment method.