The Renminbi Goes Digital To Provide A Fiat For China's Digital Trade
It doesn't look like the Chinese abhor working with blockchain; in fact, according to Coin Desk, the country is accepting of blockchain but is simply preparing people to work with bitcoin and protecting them from illegally issued cryptocurrencies. The People's Bank of China (PBOC), in fact, has an initiative in place for offering a blockchain dedicated to a digital representation of the renminbi (RMB) since 2014.
This project, in its current standing, has already received 71 patents. It has also created a trial operation involving an interbank digital check as well as a digital check and billing platform. The renminbi project could also successfully expand the central bank's influence over the domestic and international economy.
It can have broad implications in monetary systems in China as well as the future of private cryptocurrencies, Bitcoin included. PBOC's motives can further be understood simply by understanding the workings and differentiation between creating a digital fiat currency and digitalizing fiat currency.
China's authorities, however, have been trying to create an acceptable impasse between its currencies and the digital landscape. Authorities have been wary of it since there have been cases where altcoins have been found in criminal activities. In fact, Crypto Globe reported there had been cases of illicit activity involving altcoin that disrupted China's $12 trillion economies by encouraging 'capital flight' conditions.
The People's Bank of China hasn't been secretive about its plans to develop its own crypto-currency based fiat. Dovey Wan, a partner at Primitive Ventures, said in a blog post that there is potential in this move. It may finally allow the Chinese government greater control over what happens concerning its local and international economy.
The PBPC is currently looking into acceptable ways to develop crypto-currency for their own use. Wan believes that the government will favor a network design that operates under a 'permission' network, where the nodes will be monitored by the biggest financial institutions in the country. This, of course, includes the PBOC.
The repercussions for the creation of a digital RMB benefit China in the long run. It can create a check-and-balance in the trading of the digital currency through a controlled digital RMB. It can also develop a more stable system of allowing digital trade to pass through China and beyond. In other words, the digital RMB may be what it needs to create a push where the real-world RMB cannot.