Cryptocurrency advocates might have guessed that it was only a matter of time before a national bank would develop its own cryptocurrency. Now, it appears that the People's Bank of China is doing just that, putting China in line to be the first country in the world to develop and run its own national digital currency. Neowin reports that the earliest tests have involved prototype transactions between the new digital currency and some of China's own commercial banks.
No Formal Statement or Timetable
As of this writing, the Chinese government has not issued a formal statement regarding the development of a possible national cryptocurrency. Because of that, no official timetable suggesting the process of development or a potential launch date is available. However, China is not alone in speculating about the development of a national cryptocurrency. Both the State of Palestine and Russia have previously indicated their consideration of a development of this kind. For Palestine, this would address two existing issues: the fact that money-printing facilities in the area are scarce, and that a digital currency would reduce the need for difficult importations of physical currency involving the Israeli government.
Reasons for China's Interest
There are numerous reasons China may be interested in developing a national digital currency. First, there are millions of Chinese citizens who lack easy access to standard bank services as a result of infrastructure issues throughout parts of the country. Beyond that, cross-border payments are typically charged heavily, and a digital currency could help to alleviate some of the fees for Chinese citizens. Even more broadly, it's possible that a national cryptocurrency would help to strengthen the dominant Communist Party of China (CPC). Blockchain transactions are easily traceable, allowing for an easier time finding and eliminating corruption. Further, with digital currency ledgers it is possible to analyze data and draw economic insights in real time. This would certainly help the government in the development of its broad plans and strategies.
Of course, there are also some potential reasons for hesitation. One of the biggest lies in the nature of cryptocurrencies up until this point. Most digital currencies were developed specifically to be decentralized and not tied to any particular nation, government, or bank. For currencies like Bitcoin, one idea behind this was to allow for privacy and autonomy for customers. Beyond that, there is a view that decentralized currencies will allow for transactions across borders and between institutions to take place more easily. Should a government enter the cryptocurrency field, this could challenge many aspects of the decentralized status of other currencies. If China's venture is successful, would other governments follow along the same path? What would be the ultimate result for existing currencies which are not tied to a larger bank in this way?