The People’s Bank of China (PBOC) is set to release its own digital currency, according to the deputy director, payment and settlement division, Mu Changchun.
Speaking at the third China Financial 40 Forum, Changchun said the bank has researched and developed the concept of a digital currency since 2014.
Bloomberg reported Mu to have “repeated the PBOC’s intention that the digital currency would replace M0, or cash in circulation, rather than M2, which would generate credit and impact monetary policy.”
“People’s Bank digital currency can now be said to be ready,” said Mu.
According to reports, Mu explained the process starting with the PBOC’s digital money research group who created an initial prototype that adopted a completely blockchain-based architecture.
However, due to China’s size and population, using a set route (blockchain) would hinder the digital currency’s as current blockchain tech could struggle when handling such large volumes of transactions.
Instead PBOC will establish a two-tier operating system – it first converts the digital currency to banks or other financial institutions and then converts them to the public.
Using a two-tier system is expected to improve accessibility, promote innovation and avoid financial disintermediation.
“The People’s Bank of China is the upper level and the commercial banks are the second level. This dual delivery system is suitable for our national conditions,” explained Mu.
“It can use existing resources to mobilise the enthusiasm of commercial banks and smoothly improve the acceptance of digital currency.”
As of yet, the digital currency has no release date.