Blockchain expert Yao Qian outlines how China’s CBDC could be structured. He sees the Ethereum blockchain as a possible basis. The Diem network could also be accessed advantageously.
Speaking at the Spring 2021 International Finance Forum (IFF) meeting, Yao Qian, director of the Science and Technology Oversight Bureau at the China Securities Regulatory Commission (CSRC). Yao is certainly no stranger to the scene, as he enjoys the reputation of China’s “Crypto Dad”. He is considered to be one of the most influential figures in the country’s blockchain industry. According to his assessment, as reported by the 8btc portal, a digital central bank currency (CBDC) can run directly on the Ethereum network. It is also possible to use the Diem blockchain payment system, which is supported by Facebook. Qian presented the operational architecture of a CBDC as follows:
We can imagine the central bank’s digital currency running directly on blockchain networks like Ethereum or Diem. In this way, the central bank can use its backend as a service services. The CBDC is thus available directly and without intermediaries.
The aspect with Diem in particular is surprising, because in a statement issued on May 19 last year, the Communist Party declared that its CBDC was in direct competition with the Facebook Coin Libra (the project’s name at the time).
According to Yao, CBDC has no direct competition to the US dollar
Overall, Yao outlined seven aspects in his lecture that must be considered when researching and developing a CBDC. These include the technical route, the value attributes, the operational architecture, the interest rate, the distribution, the implementation of smart contracts and regulatory issues. On the latter point, it is particularly important to find a “balance between data protection and legal compliance”.
Yao headed the digital currency research division of the People’s Bank of China (PBOC) before being replaced by Mu Changchun in September 2019. In his speech, however, he made it clear that he was only expressing his personal views on the structure of the CBDC. He was unable to say whether the PBOC would assess the situation in the same way. In addition to the technical aspect, another statement by Yao regarding a possible weakening of the US dollar is extremely interesting.
Although some global stablecoins like Libra aim to solve the weaknesses of cross-border payments, weakening the international currency status of the US dollar is not necessarily the goal of the CBDC. The digitization of national currencies themselves has its inherent logic.
Yao did not comment on the general situation regarding cryptocurrencies in China. Most recently there had been a flood of rather bad news for the crypto scene from China. The government has announced a tougher course against Bitcoin miners.