China’s new digital currency ‘isn’t bitcoin and is not for speculation’

Cissy Zhou

The Chinese central bank official in charge of a new sovereign digital currency said it would not be open to speculation like other cryptocurrencies, shedding some light on a plan that is still largely shrouded in secrecy.

Mu Changchun, head of the People’s Bank of China’s digital currency research institute, on Saturday said it would be “a digital form of the yuan”, there would be no speculation on its value, and it would not need the backing of a basket of currencies, according to the official Shanghai Securities News.

“The currency is not for speculation. It is different to bitcoin or stable tokens, which can be used for speculation or require the support of a basket of currencies,” Mu said.

He did not mention Facebook’s cryptocurrency project Libra, which is scheduled to be launched next year and will be backed by a basket of underlying assets.

The currency is not for speculation. It is different to bitcoin or stable tokens, which can be used for speculation or require the support of a basket of currencies

Mu Changchun

The veteran central bank official said the top-level design, formulation, functional research and testing of the Digital Currency Electronic Payment had been completed. The next step was to roll out pilot programmes before the digital currency was launched, according to the report.

Chinese internet users were unimpressed with the news there would be no speculating on the virtual currency.

“So there will be no fun in it,” one person commented on news portal Sina.com.

Another said: “The digital currency is just another form of the yuan, but cryptocurrencies that use real blockchain technology can be treated like gold and silver.”

On social network Weibo, the response was similar. “If you don’t allow me to speculate on the digital form of the yuan, I’ll speculate on other things, like foreign exchange.”

There has been intense discussion of China’s digital currency since Facebook announced its plan for Libra. While the central bank sees the need for a digital version of the yuan in the internet era, it also sees any digital currency or payment services that are out of its control as a potential threat to the country’s financial security.

Beijing has cracked down on trading of bitcoin and other digital tokens, and Facebook’s Libra is viewed as a potential challenge to its capital account control.

Meanwhile, there is still no time frame for introducing China’s digital currency. Forbes reported in August, citing an unidentified source, that Beijing’s cryptocurrency could be launched as soon as November 11, or the Singles’ Day shopping festival, but it did not happen.

No Chinese bank or company has officially confirmed it is taking part in Beijing’s digital currency plan and the central bank has yet to disclose those details. But Chinese magazine Caijing reported earlier this month that the big four state banks and three state-owned telecoms companies were involved in the process.

Whether Chinese merchants and individuals embrace the new digital currency is an open question. Electronic payment services are widely available across the country through companies like Alipay and WeChat Pay. Alipay is a service provided by Alibaba, which owns the South China Morning Post.

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