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Central Bank of China develops national digital currency

The Central Bank of China is looking for authentication and encryptionexperts, who will develop the national digital currency.

What is a timetable for the establishment of digital money? What is a time frame for adaptation? Will digital money replace cash in the near future? According to a high adoption rate of mobile payments in China, it is quite possible.

The Central Bank of China has published six vacancies recently, which are connected with the development of digital currency as well as hardware and software for its operation. Applicants should have experience in the blockchain technology and big data and they should have a master or doctor’s degree in computer science, cryptography and information security.

The Central Bank of China formed a team to study digital currency in 2014. Bank experts provided legislative and technological bases and studied an effect of digital currency on economy and financial system, identified pitfalls and errors in 2015. At the beginning of December, profound changes were made twice in statutory and regulatory enactments, technical documents and regulations regarding the creation and use of digital currency.

It is expected that the digital currency will replace yuan, although they will be in a parallel circulation at first. Bank Governor Zhou Xiaochuan thinks that banknotes should remain in the past. According to him, the introduction of digital currency and its management system is becoming more and more relevant against the background of enormous changes in the payment sector and as the Internet evolves. ʺIt is an irresistible trend that paper money will be replaced by new products and new technologies with greater security and lower cost,ʺZhou Xiaochuan said.

The preparatory group leader, deputy director of the Science and Technology Department of the People’s Bank of China Yao Qian said that the digital currency will be introduced and spread in several stages. At the initial stage, experts will choose two or three closed systems to test and analyze the effects of the digital currency’s use. Then, it will be spread in larger projects and on a national scale after improvements.

It is unknown whether the Chinese digital currency will be based on the blockchain system, but, according to the description of vacancies, a distributed ledger of the Central Bank of China is a priority. The blockchain is a data, rights and obligations storage technology, which is protected by mathematical rules so that no one can steal it. This technology allows recording all financial transactions and storing them on the Internet. The decentralized and transparent system makes traditional operation faster and safer. The blockchain technology can be used not only in financial sector, but also for transactions, lease contracts and even to ensure the rights of voters.

Representatives of central banks from more than 90 countries discussed the impact of the blockchain technology on the financial sector at a conference organized by the FRS, IMF and World Bank in June of 2016. The event, which was held under the slogan “"Ever-changing finance: Technological transformation of the financial sector", allowed regulators and representatives of fintech industry to discuss – how modern technology can be used in central banking as well as in the activities of financial institutions, whose activity they regulate. Many of the conference participants confirmed that there were special teams, which had been studying the development of the blockchain technology in the presented by them banks. According to the “Report on prospects of the blockchain technology for 2016-2020” published by the “China Investment” consulting center, 65 financial organizations invested in the technology to develop digital currency in 2015. The overall investment reached $490 million and increased by 35,73% compared to the previous year.

However, experts also believe that, on the one hand, the blockchain technology as an important breakthrough will change the financial sector for the better, but, on the other hand, as an emerging technology it will certainly bring risks and threats. Firstly, side effects of e-financing should be taken into account. Secondly, non-system risks cannot be ignored, and more specifically, risks created by different participants of financial activity. For instance, terrorism financing, laundering of funds resulting from illegal activities, illegal banking, etc.

Currently, there is a full transition from cash to e-money in many countries. Central banks of several countries are experimenting with the blockchain technology. India changed its tack and has restricted the use of high denomination notes and set new limits on ATM cash withdrawal. The Danish Central Bank has stopped to issue paper money since 2014 and has focused on the development of electronic payment. It is worth noting that 84,2% of transactions and payments in the country were made by using credit cards in 2012. More than 95% of payments account for non-cash ones in Sweden, a country with one of the highest living standards in Europe and where a new digital currency – “e-crown” – may be introduced in coming years. Experts think that it is difficult to say when the digital currency will be introduced, but it is clear that digital and cash money will coexist for a long time.

 

Source: coinspot

  • December 29, 2016 6:03 PM MSK
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