The People’s Bank of China (PBOC) will reportedly issue its self-developed digital currency dubbed “DC/EP” (Digital Currency/Electronic Payments) to seven financial institutions in the coming months.
Chinese payment giants Alibaba, Tencent, and UnionPay are said to be among the seven institutions to receive DC/EP and will be responsible for dispersing it to citizens and others who do business with the Chinese currency, according Forbes citing Paul Schulte, China Construction Bank’s former global head of financial strategy.
Why it matters: The Chinese government has been vocal about plans for DC/EP over the past two months as the global race to launch digital fiat currency ramps up. The central bank sees DC/EP as a way to consolidate its national currency sovereignty and curb China’s demand for cryptocurrencies.
- The digital currency would be the first of its kind to be adopted on a massive scale. The central bank’s recent efforts to accelerate digital currency development were prompted by Facebook’s announcement of Libra, which is scheduled to launch next year.
Details: Four of China’s largest banks, including the China Construction Bank, the Industrial and Commercial Bank of China, the Bank of China, the Agricultural Bank of China, as well as financial services company Union Pay, and financial technology companies Alibaba and Tencent, will be the first to receive the digital currency, according to Schulte.
- Forbes cited a separate anonymous source involved in the development of the cryptocurrency, who said that an eighth institution could also be among the first recipients of the digital currency.
- The source also said that the technology behind the cryptocurrency has been ready since last year and that the cryptocurrency could launch in time for the Chinese e-commerce festival Singles Day, which falls on November 11.
- The central bank hopes to make the currency available to users in other parts of the world through correspondent banks in those countries, according to the unnamed source.
- However, an unnamed source close to the central bank told Chinese financial news outlet Sina Finance that the Forbes report was mere conjecture.
Context: The Chinese central bank said in earlier this month that the planned digital fiat currency was “nearly ready” for release after five years of research and development.
- The DC/EP is being designed to replace the physical money in circulation, not assets stored in bank accounts in digital form, according to Mu Changchun, the deputy chief of the central bank’s payments and settlements.
- The DC/EP system will have two tiers with the central bank at the top and commercial banks below. The system was designed to handle a number of transactions per second much larger than Libra could.