China’s Digital Yuan Adopts Blockchain System in Security Verification
The third-party payment method of e-commerce enterprises affords lessons to China’s digital currency, and completely gets rid of the development ideas of traditional e-currency. China’s digital yuan adopts blockchain system in security verification as well.
China’s digital currency not only distinguishes itself from electronic currency, but also the currency developed by the US Federal Reserve Board. China’s digital currency is a new monetary system based on sovereignty.
While 80% of the world’s central banks are exploring digital currency, China has been on this particular journey for a good six years. In 2014, Xiaochuan Zhou, then Governor of the People’s Bank of China, established a Digital Currency Research Institute with the goal of exploring its potential use for the PBOC, which is the country’s central bank. The following few years saw the birth of a few research centers scattering across the country.
The digital yuan will eventually replace cash in circulation, likely interfacing with popular payments platforms such as AliPay and WeChat Pay and the existing banking system. In an economy in which more than half a billion people already use mobile payments, the transition to a national digital currency should be seamless. But there’s a critical difference: Unlike privately issued forms of digital cash in wide use today, like mobile payments and credit cards, the digital yuan is the liability of the state, like cash.
From the test of China’s central bank for digital currency, China’s digital yuan is actually issued on the basis of the integration of sovereign credit and commercial credit. Generally speaking, China’s digital currency is not directly issued by the central bank, but issued by the central bank of China to the state’s commercial banks. After obtaining the digital currency issued by the central bank, commercial banks issue digital currency relying on their own credit.
The issuance of digital currency by commercial banks means that a special credit guarantee contract has been signed between commercial banks and users. Once there is a problem, the commercial banks should bear the responsibility of guarantee first. After undertaking the guarantee liability, commercial banks can report to China’s central bank. Then China’s central bank relies on sovereignty to solve problems. Therefore, no matter which link of digital currency issued by China has problems, it will eventually become China’s sovereignty issue.