Zhou Xiaochuan, the former chair of the People’s Bank of China (PBOC), said that the digital currency/ electronic payments (DC/EP) system currently being tested in cities throughout China will differ in key respects from similar initiatives under development by G7 countries
Speaking at the Budapest Eurasia Forum 2020, Zhou said that China’s DC/EP differed from the the central bank digital currencies (CBDC’s) currently under development by G7 members in two key regards.
Firstly, the DC/EP focuses more on improving China’s domestic retail payments system, while G7 CBDC’s place greater emphasis on cross-border payments, as well as dealing with the potential impacts of Facebook’s Libra stablecoin.
Secondly, Zhou believes that G7 central banks “hope to first find the optimal plan for CBDC’s, while the DC/EP is a two-tier, dynamic and evolving system.”
The two-tier system adopted for China’s DC/EP entails the central bank first issuing the digital renminbi to selected commercial banks and financial institutions, who in turn exchange it with retail consumers directly.
“The DC/EP provides second-tier institutions with greater activeness, as well as requires that they bear greater responsibilities,” said Zhou.
Zhou said that China had taken the lead in digital currency development and its development process had been more rapid, with PBOC already cooperating with various Internet giants on various forms of scenario deployment.
“The digital economy is continually expanding its share of various national economies, and the digital currency has become an important topic,” said Zhou. “China is at the world’s forefront in terms of digital currency research and development.”