The PBOC has been experimenting with Yuan Coin, a new, yet undefined form of digital currency with trials running in Shenzhen, Chengdu, and Suzhou. Currently, the coins have been given away by a lottery and can be used for online purchases via players such as JD.com. But this is where it gets interesting as this form of payment could be considered a direct competitor to Chinese tech solutions such as AliPay and WeChatPay. At the moment it’s technically not a crypto-currency either as it doesn’t use blockchain technology and is not even a decentralised asset either. So it’s unclear as to how the technology is going to be defined and how this will underpin its success as a new form of value.
Future plans are to distribute Yuan Coin via commercial banks and it will be backed by the People’s Bank of China. Perhaps its purpose may lean more towards an instrument of monetary policy, reducing the power of China’s tech companies in the payments systems, giving more centralised control back to PBOC and their ability to control systemic risk across the financial system.
It’s not clear how adoption will be perceived given that even the PBOC can’t make their intentions clear about transaction data and anonymity. So far it’s being positioned as “controllable anonymity” which is somewhat different to crypto-currencies offering a distributed ledger via the blockchain. The PBOC says agencies operating digital yuan services should “submit transaction data to the central bank via asynchronous transmission on a timely basis” which would give the bank the ability to keep a tight handle on money laundering and use for criminal purposes.
So what is the value to potential users when mobile payments assist electronic payments and cryptocurrencies distribute ownership and risk? That’s where the PBOC has clearly got some thinking to do…
Check out this CNBC story for more insights
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