The People’s Bank of China (PBOC) has gone on record saying that their central bank digital currency (CBDC) is ready to be rolled out. China’s new digital currency has been in development for about 5 years. Over the past few years they’ve been tightening the noose on cryptocurrency by making it illegal to raise money through ICOs and preventing financial institutions from holding cryptocurrency for their customers.
They haven’t made it outright illegal for citizens to use cryptocurrency. They’re just gaining as much control over it as possible, and now we see why. The PBOC is using a 2-tier system for their new currency. The PBOC will be at the upper-level. They will then transfer funds over to financial institutions and other operating agencies who will then move funds to and from the public.
China’s new digital currency is not using a strictly-blockchain based architecture. Technical details are sparse, but we can sure that it will be highly transparent and traceable. Transaction speeds will also have to be in the thousands per second to accommodate the 1.4 billion people living there.
To put things in perspective, VISA can handle about 2,000 transactions per second, Bitcoin can handle about 4. This is why Bitcoin is impractical as an everyday-use currency. It’s inconvenient to transact with but can be thought of as a good store-of-value (gold has both of these properties).
An Uncertain Future
Chinese citizens have been groomed for this as the country move towards being a cashless-society. How successful this will be remains to be seen since it’s another privacy-invading tool to peer into the financial lives of every citizen there. There has been a lot of interest in typical cryptocurrencies in China. The regulatory agencies have pushed the exchanges and miners out of the country but citizens are still connecting to the exchanges with VPNs.