Sky Guo, CEO of blockchain platform Cypherium, says shoring up interoperability will be critical to the successful implementation of central bank digital currencies (CBDC’s) such as China’s digital renminbi.
Cypherium is one of the key players in the roll out of the digital renminbi, having executed a memorandum of understanding (MOU) with the Suzhou city municipal corporation in July 2020 to “fulfil the technical requirements that satisfy the expectations and needs of world’s first operational CBDC,” as well as developed its own Digital Currency Interoperability Framework (DCIF).
In an interview with China Banking News Cypherium CEO Sky Guo said the development of CBDC’s such as the digital renminbi will have profound implications for both China’s domestic financial market and the international financial system.
“Already, China’s CBDC is positioned to revolutionize the local financial system,” said Guo.”The implementation is set to alter the concept of currency and what it could mean in the post-COVID-19 world, but beyond domestic implementation, the digital yuan is also aimed at facilitating cross-border payments.
“This will enhance international trade engagements and also serve the millions of Chinese citizens that are living in the diaspora.
“For this reason, the need for the People’s Bank of China’s (PBOC) digital yuan to interact with the digital currencies of other central banks must be considered. This also applies to other domestic financial institutions and payments platforms in the private sector.”
Guo said that Cypherium is working closely with PBOC on efforts to shore up the interoperability of the digital yuan, in order facilitate its use in overseas jurisdictions and its interactions with the CBDC’s of other nations.
“Third-party intermediaries have become part of the fabric of the global financial system, and Cypherium and PBOC’s Digital Currency Research Institute will continue to share a close relationship with regard to the actualization and sustainability of the digital yuan project,” Guo said.
“As a third-party platform for enabling the achievement of interoperability in the emerging global open banking ecosystem, Cypherium is already playing a key role in building the necessary infrastructure that will enable implementation.
“This is the reason for the development of Cypherium’s Digital Currency Interoperability Framework (DCIF). The primary purpose of the DCIF is to enable a much needed interaction between particular CBDCs with other national economic systems as well as a wide range of private sector driven industries.
“This is the way by which CBDCs, including the digital yuan, can reconcile with the various functionalities outside their own primary ecosystem.
“Cypherium DCIF is introducing a novel approach to the challenges facing the adoption of CBDCs. This will address the issues of reconciliation across national currencies between the participating central banks, commercial banks and other participating fintech institutions both in the public and private sector, without leaving out the consumers.”
With regard to Cypherium’s cooperation with the city of Suzhou on CBDC implementation, Guo said its efforts will focus on the development of infrastructure to achieve the following features:
- Distributed payments that eliminate unnecessary intermediaries;
- Financial inclusivity for the unbanked and underserved;
- Efficient cross-border payments for an increasingly globalized economy;
- Digitized management of monetary policy for more effective and immediate regulation;
- A new framework to provide for the next generation of financial service innovation.