China is preparing to become the first country to launch its own digital currency.
China’s central bank has released few details of its Digital Currency Electronic Payment (DCEP) project. Work on the project began five years.
Some observers say the DCEP shows both financial innovation and the government’s desire to increase control over the movement of money.
China’s digital currency has similarities to Facebook’s proposed digital currency Libra and existing cryptocurrencies such as Bitcoin. Like those forms of payment, the Chinese currency will be stored in a digital wallet.
What is somewhat different is that China’s central bank will be able to follow where the money is going and even supervise trading.
Observers say the goal of the project is for China to protect its economy at a time when newer payment systems could permit illegal money flows.
Keyu Jin is a professor at the London School of Economics. She said, “There’s a consensus around the world among central bank governors and governments at large that they want to have control of money and money supply.”
She added that the strong desire for control “is probably more unique to China than anything else.”
In September, China’s central bank chief Yi Gang said there was no timeline for launching the digital currency and that more work needed to be done. The Reuters news agency reports that the People’s Bank of China has sought legal rights to more than 50 inventions related to the digital currency.
Chinese officials have not hidden their disapproval of Facebook’s Libra. They have called it a threat to the sovereignty of China and other developing economies. China claims that digital currencies should only be provided by governments or central banks.
Mu Changchun is the head of the Chinese central bank’s digital currency research center. He has suggested that the new currency should be made available through commercial banks, just as physical money is.
The digital currency will follow models similar to systems such as Apple Pay and the Chinese payment system Alipay. These require a commercial bank to put money into a digital wallet that can be downloaded onto a smartphone.
Unlike physical money, however, a tracking system could follow the digital currency’s movements from one person to another.
Mu said the digital currency would strike a balance between anonymous payments and “classified supervision.” He said the goal is to prevent illegal financial activities, with officials able to watch for such activity by studying huge amounts of information.
“Once we analyze these transactions, use big data and data mining technology and conduct identity comparisons, we will be able to find the culprits,” he said.
So far, there has been limited public reaction in China, a country already used to weak privacy protections and government control. But people on social media sites such as Weibo have expressed a mix of feelings. Some say a digital currency could prevent corruption. But others are concerned. One user asked: “What will happen to my freedom to build wealth, my secrets and safety?”
Huang Qigan is a vice chairman of the China Center for International Economic Exchange research group. He said the People’s Bank of China has been studying digital currency for five or six years. He believes it is ready to be put into use.
“China will likely be the first country in the world to issue sovereign digital currency,” he said.
I’m Mario Ritter Jr.
Brenda Goh reported this story for Reuters. Mario Ritter Jr. adapted it for VOA Learning English. George Grow was the editor.
Words in This Story
currency – n. the money of a country
innovation – n. the action of creating, restructuring or reforming
wallet – n. something used to hold money and plastic cards
consensus – n. agreement by all parties involved
unique – adj. the only case
sovereignty – n. the ability of a country to rule itself and make its own decisions
commercial – adj. related to business and making money
track – v. to watch and follow something or someone
data – n. facts and information
culprit – n. someone who is blamed or considered responsible
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