Central Bank Digital Currencies Have No Direct Relationship With Blockchain, Says PBoC Official
Jiang Guoqing, who spearheads the R&D department of the PBoC Digital Currency Institute, said last Saturday at a fintech forum that the central bank digital currency(CBDC) is not directly linked to blockchain, and the underlying technology is only an alternative means to facilitate the circulation of state-backed cryptocurrency.
Jiang stated that bitcoin is the first use-case for blockchain technology in the financial services sector. Meanwhile, many international financial institutions like European Central Bank have teamed up to apply blockchain technology in the field of payment and settlement, and PBoC has completed a successful trial run of a digital bank acceptance exchange using a digital currency it developed in 2017.
“The ‘wealth effect’ arising from the massive gains on cryptocurrency trading drives blockchain industry growth and the tech evolution. And whether blockchain alone is enough to solve many pain points of various industries in the future remains to be seen.” Jiang said.
He also argued for a balance between the two polars of centralization and decentralization. Judging from relevant research and the practice of cryptocurrency regulation, Jiang thought the complete decentralization is not feasible at present, and decentralization can be considered as multi-centralization in terms of applications.
“Blockchain is a beneficial supplement to the original centralization through the cross certification among multiple centers. The technology will enable increase trust and transparency between industry players.” Jiang said.
When it comes to the research of the central bank digital currency, he reiterated that the CBDC is a combination of electronic currency and cash, and it aims to gradually replace cash.
“ CBDC is not directly linked to blockchain technology, and does not even have a necessary connection between the two technically.” Jiang said, “ CBDC which is also a binary system is issued by the central bank and its circulation is backed by commercial banks too, so it will not be additionally issued. CBDC does not compete with the existing monetary system, instead, is progressing with current currency notes and payment methods.”
Despite Chinese government’s hardline stance on crypto trading and mining, PBoC remains active in developing state-backed digital currency. And the central bank’s digital currency research lab as filed 41 blockchain patent so far, part of its effort to create a digital currency.