According to the PBoC, the increasing popularity of cryptocurrencies led to the creation of this project. This project is the first whitepaper posted by the People’s Bank of China on the digital yuan.
The People’s Bank of China revealed to the media the first white paper regarding the digital yuan. The information appeared through a working document for the project of its digital currency, known as e-CNY.
The document dates back to 2014 to explain the background, features, and development of the initiative that subsequently led to the creation of the digital currency.
The financial entity explained that one of the main reasons for creating the digital yuan was the appearance of cryptocurrencies, the risks, and other primary challenges that these currencies transferred to the current financial system.
The agency then pointed out that the development of the digital yuan focused on addressing the concern generated by the fluctuation of the prices of cryptocurrencies. The financial entity stated that this situation encouraged some commercial institutions to launch anchored cryptocurrencies or stable icons.
The financial entity tried to balance its values by tying them to sovereign currencies or other assets. The Bank warns that some commercial institutions may be seeking the opportunity to launch stable icons globally, which in their opinion, would bring risks and challenges to the international monetary system.
Reasons for the Creation of the Digital Currency
The first goal of this project is to bring more diverse forms of cash. This money is the cash the Central Bank provides and meets the demand for digital money. Another vital goal is to support financial inclusion.
As a second point, they focus on bringing support to fair competition, efficiency, and security of the retail payment service. The text explains that this initiative builds itself on existing electronic payment technologies and complements the existing system.
Its third purpose is to expand this initiative on an international scale and explore the improvement of cross-border payment. The report clarifies that it is getting ready to take this step and start studying the pilot tests designed for this purpose. The goal is to establish the exchange, agreements, and regulatory cooperation mechanisms on digital fiat currency online.
The document also refers to the protection of consumer rights and interests. It emphasizes that authorized operators will adequately handle potential disputes and customer losses, following the dispute resolution methods.
The report also explains matters related to regulatory measures. This report’s goals focus on management for the business and requirements for operators. It also focuses on implementing laws and rules to strengthen the protection of users and create a safe environment for the use of digital currency.
The Digital Yuan and Smart Contracts
The white paper highlights that one of its best attributes is programming based on the implementation of smart contracts.
Under the premise of security and compliance, this feature allows self-executing payments according to predefined conditions or terms agreed between two parts, to pave the way for business model innovation.
By: Jenson Nuñez
