As things stand, China is set to roll-out a Central Bank Digital Currency (CBDC) that will grant the People’s Bank of China (PBoC) unprecedented economic data and reformed monetary policy tools. They can expect little to no domestic competition due to the PRC’s regulatory actions against private digital currencies.
The advent of blockchain-based digital currencies has presented monetary policy-makers with a multi-faceted challenge which can serve to either undermine their reach, or enhance it to unknown heights. This is especially true for China, where the outlawing of most digital currency activity occurs in tandem with state-driven research on the underlying technology for a state-backed digital currency.
Digital Currency Policy in China
Government edict on the matter of digital currency can provide telling insight about what a state wants to achieve. We find that the State has a concrete ‘digital currency policy’ at the point where they are actively pursuing a goal they have with regards to digital currency. Although former People’s Bank of China (PBoC) chief Zhou Xiaochuan has made it clear he believes paper money will eventually be replaced by digital currency due to its greater security and lower cost of relevant financial infrastructure, the economic governance of China has demonstrated a complete rejection of cryptocurrency as a valid monetary instrument.
In the case of the PRC, their digital currency policy, as determined by their legislative action in conjunction with their state-backed research, is the active removal of domestic competition for their own CBDC, and thereby the maintaining of RMB’s legal status. The PRC’s regulations alongside their research highlight a pattern of banning domestic use of uncontrollable technology and introducing a state-backed version which expands upon the outlawed form in which this new technology was introduced.
At least they are honest about their actions and is a move in parallel with similar efforts ongoing in Russia.