The founder of one of China’s leading fintech associations has highlighted the ability of a statutory digital currency to help central banks push interest rates into negative territory during crises such as the COVID-19 pandemic.
Cao Yin, the founding partner of Digital Renaissance Foundation, and the Chief Expert of blockchain at China Cinda Security, said to Global Times that the People’s Bank of China (PBOC) should accelerate the launch of its proposed statutory digital currency in order to avail itself of a highly effective monetary policy tool that replaces the M0 money supply.
With central banks including the US Federal Reserve, European Central Bank and the Bank of Japan driving interest rates into zero or even negative territory to combat the impacts of COVID-19, Cao said that digital currency can help facilitate this process should PBOC need to resort to a similar expedient.
“If there is a chance China is considering lowering its interest rate into negative territory as an final option and directing such policy to commercial loans and lending, a circulated digital currency rather than M0 will be able to achieve that,” Cao said.
Li Lihui (李礼辉), former president of the Bank of China (BOC) and current head of the blockchain team of China’s National Internet Finance Association (NIFA), previously said to state-owned media that the spread of COVID-19 could accelerate efforts by China to launch a statutory digital currency.