Binance, one of the largest cryptocurrency exchanges worldwide, has just published a report about the China’s forthcoming Central Bank Digital Currency (CBDC). According to Binance, the currency will be a two-tier system for issuance of the assets and also for redemption.
Binance writes that for the first part, the People’s Bank of China (PBoC), will work through Chinese commercial banks to “issue and redeem China’s CBDC.” For tier two, Binance reports that the commercial banks, upon receiving the currency, would then be responsible for its redistribution to other market participants. The report also notes that the use of blockchain has not yet been definitively decided for the second tier. Apparently, there’s still a lot that isn’t exactly clear about the PBoC’s direction for its cryptocurrency.
Furthermore, the PBoC seems to be interested in achieving as much financial inclusion as it possible can. This is why according to Binance, the CBDC will allow citizens send and receive funds whether or not the hold a bank account.
“Through the digitalization of the RMB, the PBoC aims to improve the effectiveness of its monetary policy, while mapping out a more comprehensive picture of all individuals and businesses across China.”
The currency is expected to be a stablecoin, backed 1:1 to China’s Renminbi and it is ultimately expected to have a high turnover, just like the fiat. In addition, the system is expected to be able to handle 300,000 transactions per second. This is another point that makes it unlikely that blockchain will be used because that much scalability is currently impossible with blockchain technology.
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