Chinese Central Bank Official Calls for Greater International Oversight of Digital Currencies

PBOC
China’s e-yuan project is a clear frontrunner in global efforts to actualize a digital currency (image source: Caixin)

An official at the People’s Bank of China (PBOC), China’s top monetary authority, has called for more robust international management of state-backed digital currencies. This move comes amid a global race to develop and implement the first major, fully-fledged model of its kind.

The remarks came from Mu Changchun, the head of the PBOC’s “e-yuan” project, during a forum hosted on Thursday by the Bank for International Settlements. As more and more countries take steps to develop digital versions of their currency, the need for greater global cooperation between monetary bodies has become increasingly evident.

Specifically, Mu argued that a system enabling the efficient and direct exchange of different digital currencies must be established to ensure reliable, seamless trade between nations. To accomplish this, he suggested “a scalable and overseen foreign exchange platform supported by DLT (distributed ledger technology) or other technologies,” as quoted in a Reuters report.

The comments align with China’s drive to get its digital currency up and running in time for a grand unveiling during the 2022 Beijing Olympics, as well as its efforts to internationalize the yuan as a global reserve currency.

Central bank digital currencies (CBDC) are distinct from other widespread electronic currencies such as Bitcoin in that they are backed by a state’s leading monetary authority, bestowing them with the status of legal tender equivalent to paper money. While not anonymous like private cryptocurrency systems, CBDCs offer a range of benefits for domestic economies including increased financial security, efficiency and traceability.

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While no major economy has yet fully implemented a national digital currency, the vast majority of central banks around the world are currently engaged in some form of research or trials regarding potential future introduction. China’s e-yuan project is a clear frontrunner in global efforts to actualize a digital currency, with trial runs having already been conducted in several cities.

The global rise of CBCDs stands to reverse the essentially libertarian appeal of anonymous cryptocurrencies like Bitcoin by coopting the cutting-edge technology and assimilating it into the larger architecture of the state. In the future, these digital currencies will likely make transactions easier to document and monitor, facilitating the detection of crimes and expanding the reach of law enforcement.

In China, questions remain surrounding the future impact of the e-yuan on some the country’s leading tech giants, particularly Alibaba and Tencent, which currently provide ubiquitous digital payment services that have contributed greatly to the country’s widespread adoption of cashless transaction methods.

Over recent years, Chinese officials have increasingly emphasized their ambition to play a more proactive role in the international monetary system. As Mu Changchun’s Thursday comments indicated, the fast-growing realm of digital currencies could offer a viable path for the country to achieve that goal.