China’s central bank has filed 84 patents related to its planned fiat digital currency, according to a recent report by the Chamber of Digital Commerce, offering glimpses of how it plans to integrate the money into the country’s existing banking system.
Why it matters: Countries around the world are stepping up their own efforts to develop central bank digital currencies as fears of China’s rising influence continue to grow.
- People’s Bank of China is widely regarded as a frontrunner in the global race to roll out digital money.
- However, the People’s Bank of China (PBOC), the country’s central bank, has not yet revealed many details about technology specifications or a launch timetable for the digital renminbi, known as the digital currency electronic payments (DC/EP) system.
Details: A February report by the US-based Chamber of Digital Commerce, an advocacy group for blockchain and digital currency, analyzes the 84 patent applications the PBOC has filed related to digital currency development and reveals insight on its plans to integrate DC/EP into the country’s existing banking system. The applications focus on designing protocols that will control the issuance and circulation of the currency as well as frameworks for performing inter-bank transactions and settlements, among others.
- The DC/EP will be distributed through a two-tiered system, according to the study, corresponding with earlier statements. The first tier is between the central bank and commercial banks and the second tier will connect commercial banks with individuals and businesses.
- The patents also offered insight into how the digital currency will be distributed and managed. The tokens will be issued by the central bank and distributed to the public through commercial banks, according to the report. Consumers and businesses can send and receive the tokens via mobile wallet.
- While user privacy protections were mentioned in some patents, the DC/EP system could still track transaction data including its value and the identity of the transacting parties, although it may appear as anonymous to the consumers, according to the report.
Context: China’s DC/EP has been in the works for at least five years. Chinese media reported in December that the central bank would soon start internally testing the system.
- Central banks around the world are looking into it as well. In January, central banks in Canada, Japan, Sweden, Switzerland, the EU, and the UK formed a working group to explore CBDC applications.