China claims that their new digital currency is ready for mass adoption. The currency is a blockchain-based virtual currency.
The People’s Bank of China (PBoC) has recently announced that its digital currency “can now be said to be ready.” This has been in research for the past 5 years according to the central bank.
According to PBoC deputy director Mu Changchun, a prototype that adopts blockchain architecture has been successfully developed after five years of research. This was reported by CoinTelegraph.
The announcement by Mr. Changchun was made at the China Finance 40 Forum. The local news site Shanghai Securities News reported on the event held on August 10th.
Not a simple blockchain
The problem with implementing a blockchain cryptocurrency in China is the low transactions per second. The Chinese economy deals in high volumes and therefore requires a higher concurrency performance. Basically, it has to be able to compute multiple transactions at the same time. This can be problematic with a simple blockchain. Bitcoin has a 7 transaction per second rate that became unusable somewhere in 2013.
Two part operating system
To solve this problem Changchun said that the chinese digital currency would not be using a simple blockchain architecture.
The digital currency will be using a two part operating system that can deal with “complex economy with a vast territory and a large population”. On one part the Central Bank will deal with the upper levels of the transaction requirements. The lower level will deal with commercial banks and their transactions. according to Mu, this will improve accessibility, enhance adoption rates among the public, and promote innovation among commercial entities.
According to the PBoC executive, the digital currency is designed to be suitable for “small-scale retail high-frequency business scenarios.”
Is the digital currency a pipe dream?
The chinese government has not been kind to cryptocurrencies in the past. Many exchanges moved out of China after the 2017 ban. The lack of central control and the capacity to bypass strict government restrictions.
A recent ruling by the Supreme Court of China found that cryptocurrencies can be seen as property and therefore must be insured. This has renewed the push for cryptocurrencies in the country. However, the government may never consider officially supporting any cryptocurrencies that are not controlled by it.
The idea of introducing a digital currency based on blockchain seems counter-intuitive. The very concept of cryptocurrency includes a decentralized approach to ledger keeping. If the Chinese implement a centralized system, it beats the purpose of the distributed ledger. They may, however, be looking to solve security issues using the blockchain. China’s Blockchain Currency ready for mass adoption according to their central bank.
Indian Digital Rupee
The Indian government has received a report recommending banning cryptocurrencies. In the same breath, it also advocates distributed ledger technologies and a possibility of India’s very own digital currency based on blockchain but controlled by the central bank.
These contradictions may lead to these centrally controlled cryptocurrencies becoming non-starters. Libra of Facebook is facing the same problem.
No one is sure why the Chinese government would implement such a currency. The current scenario with the US trade war may be a factor. China may want to show itself to be forward-looking at a time when the US has stopped Libra’s development. In contrast, China’s Blockchain Currency ready for mass adoption.