January 28, 2023

China's cryptocurrency will be fully centralized

China's cryptocurrency will be fully centralized

The latest issue of the China Blockchain Report sets out the vision for the Chinese blockchain and the competition of the People's Bank of China (NBK) with stablecois Facebook Libra. The report said that China sees blockchain as a tool for disintermediation (reducing the role of financial intermediaries) and increasing profitability in industries with an outdated approach to work.

The report also states that the Chinesecompanies are regarded as stakeholders in the country's economy, and that they, for the most part, are in compliance with laws and regulations. It is interesting to note that foreign companies such as IBM and Walmart are also involved in this sector, which helps to explore blockchain and track the supply chains of food and pharmaceuticals.

The report details the People’sBank of China and its ambitions in the field of national digital currency. According to the document, everything indicates that this is not quite a cryptocurrency, but rather a fiat currency.

Although China is the centerblockchain research, since 2013, the country has phased out cryptocurrency transactions, not allowing banks to process them. This happened until 2017, by which time the ICO boom hit China, diverting inexperienced investors from the Chinese yuan, which is why cryptocurrency exchanges were closed.

"Capital controls have long been a pillar of China's monetary policy, and cryptocurrency has become a new and effective way to get around this."

NBK statements indicate that the digital currency seeks to replace the M0 aggregate - the money in circulation, which, as indicated in the report, central banks control most.

In addition, due to the fact that private companiesthey digitize the currency using popular mobile payment platforms such as WeChat Pay and Alipay, a significant percentage of payments that determine the consumer economy has moved to these platforms. He moved them from M0 to M2, which relates to funds and loans in commercial bank accounts.

In addition, the document shows howover the past ten years, the volume of the M2 unit in China has grown, which is ahead of economic growth. It is also said that this was due to excessive lending.

“This is only partly due to the growing popularitydigitized currency through WeChat Pay and Alipay. Taking into account the amount of loans available, the People's Bank of China is trying to find a council and take the helm of the entire economic cycle. ”

The report also reflects onwhether the cryptoyuan of the People's Bank of China is too big for the blockchain. For example, Ethereum can process around 15 transactions per second due to its narrow validation gateway.

China's digital currency plans to handle 300000 transactions per second, which increases the likelihood that, although the system will have elements of blockchain technology, it will ultimately be centralized.