China’s digital yuan will use and build smart contracts to counter Alipay-like payment platforms developed by private conglomeratessaid the former head of the People’s Bank of China, Yao Qian.
Presentation at the Beijing International Financial Forum, Qian argued that just simulating its physical counterpart would not be enough for the digital yuan to be successful. To take full advantage of its digital status, it will attempt to become a “smart currency” by using smart contracts. he added according to local sources.
Central banks need to innovate legal fiat money to keep up with digitization. He said. Qian cited the European Central Bank, the Bank of Japan, and the Central Bank of Canada as examples of working with smart contract-based digital currencies.
Apparently, According to Qian, China’s original idea of creating a digital yuan was to counter the effects of private payment platforms, which are becoming increasingly popular and potentially affecting the country’s ubiquitous payment service, Alipay. However, he insisted that the Chinese government did not develop the digital yuan as a monitoring tool to keep track of all transactions in real time:
“The digital yuan must strike a balance between protecting user privacy and fighting crimes such as money laundering, tax evasion and terrorist financing.”
Central banks can provide digital currency to users without intermediaries “if the digital dollar and yuan work directly on blockchain networks like Ethereum and Diem”.Qian explained. Through layered operations, the central bank’s digital currency can bring better benefit to non-banks and achieve financial inclusion, he added.
Yao Qian is the director of the Science and Technology Supervision Office of the China Securities Regulatory Commission. He was previously director of the PBoC’s Digital Currency Research Laboratory. He is known for his work on the digital yuan since his first steps in 2014. His friendly attitude towards cryptocurrencies as an official of the Chinese counterpart of the SEC earned him the nickname “Chinese crypto father”.
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