The point of view from PBOC’s VP on digital currency launching
In recent years, central banks and monetary authorities in major countries and regions are researching on and developing issuance of digital fiat currency. Central Banks in some great nations like Singapore and the Sweden, have already conducted some relevant experiments. The People’s Bank of China (PBOC) is also exploring and studying actively in this topic. Yifei Fan, the Vice President of PBOC, demonstrated his point of view of PBOC’s digital currency issuance in this article.
A ‘two-tier’ launch system could be used by PBOC in issuance of digital currency. It is a complex process for great nations’ central banks to launch digital currency. China has a vast territory and a large population. The economic developments, resources and the education levels in each region are quite different. Thus, in the processes of designing, releasing and circulating digital currencies launched by the central bank, the diversity and complexity of the whole system and institution must be fully considered. For example, you need to consider the use of digital currencies in some remote areas with insufficient network coverage.
If simply adopt the ‘one-tier’ launch, might encounter difficulty. To promote the convenience and accessibility of the central bank’s digital currency and enhance the public using- willingness, ‘two-tier’ launch can be a solution to the problems mentioned above.
The ‘two-tier’ launch is conducive to making full use of the existing resources, talents and technologies and other advantages of business as well as accelerating innovation and competition through a market-driven promotion. ‘two-tier’ launch is also conductive to distribute and defuse risk one by one. It can also avoid ‘Financial Disintermediation’.
Through the arrangement of two-tier launch system, PBOC’s digital currency released in a loosely coupled manner and adhere to a centralized management model.
Yifei Fan also stated that currently, China’s current central bank digital currency design should focus on M0 instead of M1 and M2 and also need to be cautions of the adoption of smart contract.