The “People’s Bank of China” does not allow itself a break in the development of the digital yuan. Now the PBoC has published the whitepaper of its digital currency for the first time – and surprises with some details.
Bitcoin as a trigger
China has been working hard on a CBDC (Central Bank Digital Currency) since 2014. For about two years, the digital yuan has already been tested through pilot programs in retail, now the exact concept of the currency has been made public for the first time. Surprising insight: The digital currency of China called e-CNY will be programmable and, contrary to previous statements, will have smart contract functionality. This is confirmed by the just published white paper of the coin.
The document also explains various use cases and explains how the e-CNY should be used in detail. With its introduction, the digital yuan becomes the legal tender in the country and then exists in parallel with the” physical ” RMB.
Interesting detail: The digital yuan should also be able to be issued without an Internet connection. And, according to the white paper, one of the main reasons for China’s digital currency push has been the emergence of cryptocurrencies such as Bitcoin (to buy from Libertex or eToro)-and the alleged risks it poses to existing financial systems.
“Bitcoin and other cryptocurrencies that use blockchain and cryptography technologies claim to be “decentralized”, “completely decentralized”, while they lack intrinsic values, they are highly volatile, have low transaction efficiency and consume an enormous amount of energy. These restrictions prevent you from becoming a currency.“
Cryptocurrencies would mainly be used for speculation that involves potential threats to financial security and social stability, the PBoC explains. Stablecoins also pose a threat, the central bank believes: they pose a wide range of risks and challenges for global monetary policy, payment systems and cross-border capital management.
Digital Yuan with Smart contracts
Contrary to previous assumptions, the digital yuan should now be programmable and have smart contract functionality. The PBoC clearly clarifies this in the whitepaper:
“The e-CNY can be programmed by adding smart contracts that do not interfere with its currency function. Without undermining its security and compliance, the programmable e-CNY can enable automated payments between transaction parties based on their pre-set conditions and rules, thus bringing innovation to business models.“
Will the e-CNY become direct competition for the number 1 smart contract platform, Ethereum? Especially since an important design feature of the coin should be “low fees”. The PBOC does not charge any fees from authorized operators – nor do the operators charge any fees from individual customers for exchanging e-CNY. The Chinese central bank’s claim to want to keep the digital yuan semi-anonymous is also surprising: the e-CNY follows the principle of “anonymity with low value and traceability with high value”, and “great importance is attached to the protection of personal data and privacy,” according to the white paper.
You can read the full e-CNY white paper here.