Saturday, January 28, 2023

People’s Bank Of China Releases e-CNY Whitepaper

China took another step towards Digital Yuan’s official launch by releasing its whitepaper for the first time in the country, according to a report.

The whitepaper was issued on Friday, by the People’s Bank of China (PBOC), to confirm that country’s own digital currency has been developed to be programmable with smart contract features. However, till date, the country has not designed any concrete roadmap or finalized any date for Digital Yuan’s official launch.

The bank has explained every little detail, which involves background, features and the progress, of Digital Yuan or e-CNY in the whitepaper. 

According to the paper, China started its research and development on e-CNY, after it noticed the people’s growing interest in cryptocurrencies, and the risks and challenges involved with them. 

PBoC, in its whitepaper, mentioned, “Adopting blockchain and encryption technology, cryptocurrencies such as Bitcoin are claimed to be decentralized and entirely anonymous. However, given their lack of intrinsic value, acute price fluctuations, low trading efficiencies and huge energy consumption, they can hardly serve as currencies used in daily economic activities. In addition, cryptocurrencies are mostly speculative instruments, and therefore pose potential risks to financial security and social stability.”

It further stated that in order to tackle the price fluctuation concern of cryptocurrencies, some of the commercial institutions introduced fiat currency-pegged digital currencies, stablecoin. This way the commercial institutions tried to stabilize the value of cryptocurrency. 

A few of the commercial institutions even planned to launch global stablecoins, which could be risky for the international monetary system.

PBoC further stated that e-CNY has seven features and one of them is programmability. 

Notably, this is for the first time, the central bank of China has officially confirmed that it will be developing e-CNY along with a programmable feature into it.

“E-CNY obtains programmability from deploying smart contracts that don’t impair its monetary functions. Under the premise of security and compliance, this feature enables self-executing payments according to predefined conditions or terms agreed between two sides, so as to facilitate business model innovation.” the PBoC wrote in the whitepaper. 

However, some of the descriptions are totally different from PBoC’s officials’ 2018 and 2019 remarks. 

The head of the PBoC’s digital currency research lab Mu Changchun and deputy governor of the PBoC, Fan Yiefi, shared their different opinions on e-CNY’s programmability feature.

According to them, e-CNY could add on smart contracts to perform its role as a currency. But other than that, smart contracts could be “undermining the Renminbi by adding extra social or administrative functions.”

Currently, the country has been testing e-CNY’s confined usage, in Chengdu, for the specified purpose only. In this experiment, the developers have programmed the e-CNY to be spent on subway and bus tickets.

PBoC has also received authorization on dozens of patents which depicts e-CNY is capable of tracing transactions, this the country could ensure whether the funds are being spent on intended goals or not.

Whitepaper also states that on June 30, around 70 million transactions in the country were facilitated using Digital Yuan.

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