China is Already Seeing Fakes of Its Still Developing Digital Yuan Wallet
After almost a year of serious work done on the development of the country’s national digital currency, China saw its efforts culminate this month when it successfully completed a pilot project where it distributed the currency to the residents of Luohu. The novel project attracted a lot of media attention, with many reporting that a large percentage of users that received the so-called “red packets” continued to top up their wallets and use the digital yuan in further purchases.
And while most of the world has since been focused on analyzing the impact the successful trial will have, scammers in China have been busy with forging the service. According to Mu Changchun, the head of the digital currency research institute at the People’s Bank of China, the government has already seen cases of forgery pop up on the market.
Speaking at the 2020 Bund Summit, Mu addressed the issue and highlighted the importance of finding a solution to the problem before it becomes too big to handle.
“We have already found counterfeit digital RMB wallets on the market,” Mu said. “Just like in the era of paper banknotes, the People’s Bank of China still faces the problem of counterfeiting and implementing anti-counterfeiting measures[…]”
The topic of counterfeiting arose as Mu was speaking about the way the central bank was going to shape its monetary policy regarding the digital yuan. As the government and the central bank both have a momentous job ahead of them, it’s of the utmost importance to resolve as many fundamental issues as early as possible. Mu explained that establishing anti-counterfeiting measures is an extremely costly process in the case of paper notes, and that it can only increase in cost when applied to digital currencies.
For PBoC to reduce the cost of these measures and prevent counterfeiting, it needs to establish a coordinated effort to develop a digital yuan wallet that is easily identifiable and recognizable. An important part of legitimizing the official digital yuan wallet is including other companies and government organizations in the ecosystem. Mu noted that it was important for other organizations to “develop their own special features” that will be used to create a richer and more well-rounded financial product.
However, the government’s aggressive push towards finally launching the digital yuan doesn’t mean that it plans on transitioning to a fully digital economy any time soon.
Mu explained that neither the central bank nor any government branch will use any “forceful administrative measures” to push for the adoption of the digital yuan. Instead, the bank plans on adopting a “market-oriented” approach and adjusting the issuance of the digital currency according to demand.
“How much digital yuan citizens need—we will issue the corresponding amount,” he said. “As long as people need the paper yuan, we will continue to issue it. The two will co-exist for a very long time, in my personal opinion.”
Priyeshu is a software engineer who is passionate about machine learning and blockchain technology. He built his first digital marketing startup as a teenager and worked with multiple Fortune 500 companies. He's an alumni from mass-transit app Ola and holds a degree in computer science engineering.
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