Bitcoin Forum

China may be about to launch a fiat digital currency, but in all likelihood, it will only resemble a cryptocurrency on the surface.

And it probably won’t use a blockchain. While inspired to some degree by bitcoin (https://bitcoinbd.org/tat-tan-tat-ve-bitcoin-tu-a-z/) and the like, the effort is explicitly framed as a strategy to beat them back.

The project was thrust into the spotlight last weekend when a senior official from the People’s Bank of China (PBoC) said at a closed-door conference that the country’s central bank digital currency (CBDC) is ready to launch.

The CBDC aims to replace M0, meaning cash in circulation, via a two-tier system: the central bank issues the digital yuan only to commercial banks, who will further issue it to the public, Mu said. This approach is perhaps unsurprising since Yao Qian, the former chief of the research lab, hinted at this design in an op-ed published in CoinDesk in 2017.

However, one comment from Mu that got overlooked by many is that he believes “the two-tier issuance system will be helpful to restrain the public’s demands for crypto assets and strengthen the country’s sovereign currency.”

Mu did not elaborate on how everyday users would interact with this proposed mechanism or to what extent the CBDC really employs distributed ledger technology. And it remains unclear when the central bank plans to test and roll it out or, upon its launch, whether it will be optional or mandatory for Chinese consumers.

But dozens of patent applications submitted by the research lab to China’s State Intellectual Property Office reviewed by CoinDesk offer a window into the PBoC’s thinking on how the system may function and its similarities and (more importantly) differences with crypto.

Crypto-inspired
The PBoC’s Digital Currency Research Lab was formally launched in the summer of 2017 and spearheaded by Yao Qian, although Mu indicated the work has been ongoing for five years. Yao left the position for a different agency around October 2018.

To date, the lab has filed more than 50 patent applications, all either invented or co-invented by Yao, and about 20 of those focus on design specifications of a so-called digital currency wallet.

Each document covers a specific technology feature of the proposed system, ranging from how to apply for and create a wallet, how to transfer money to and from saving accounts, how a peer-to-peer transaction is verified, etc.

The goal is to build a wallet to store digitized yuan that is unlike the electronic wallets of any bank or third-party payments application. Those wallets, one patent document says, are “merely an extension of assets held in custody at a bank account.” As such, the approach borrows the idea from bitcoin of a peer-to-peer transaction system where users possess private keys to control the asset.

One patent application, entitled “a method and system for enquiring digital currency transaction information” filed on Dec. 28, 2017, describes a digital currency wallet that aims to bridge the gap between existing electronic wallets and “private quasi-digital currency wallets, like that of bitcoin.”

The former is not an independent wallet, which may incur security issues, and the latter, while allowing users to personally possess their assets, does so in an anonymous way with transactions of that can’t be reversed, the document further states.

KYC-ed digital yuan
And one crucial way to optimize such circulation appears to be stripping the anonymity feature of cryptocurrencies and including a know-your-customer (KYC) process required by other payment methods.

So far, physical cash is arguably the only form of fiat money inside China that can remain anonymous, compared to bank wire or third-party methods offered by companies like Alibaba or WeChat – both requiring real-name verification authenticated by users’ IDs and banking information.

“Existing M0 (banknotes and coins) are subject to counterfeit and money laundering risks. … The [CBDC] system should follow the existing rules about anti-money laundering and anti-terrorism financing imposed on cash, and should report to the PBoC on large amounts and suspicious transactions,” Mu emphasized during his speech.

His note echoes the design specifications entailed by various patent applications for the proposed peer-to-peer digital currency wallets.

For example, the patent application on how to apply and create digital wallets filed on Dec. 28, 2017 stated that the system lets users apply through their banks and the creation of such digital currency wallets will be registered at the issuance organization.

Another document detailing how to redeem the CBDC from saving accounts filed on June 26, 2017 explained that after a user sends a request to withdraw money from their saving accounts – similar to withdrawing from an ATM, except now it’s not cash but in a p2p wallet – the corresponding issuers will need to verify a user’s ID before granting the redemption.

And after that, when a user initiates a payment transaction from the independent digital wallet, a third party will verify who is sending how much to whom.

In addition, another document specifies a system that aims to customize a tracking solution to make the CBDC traceable even across multiple owners and layers.

All of this, of course, is a far cry from bitcoin, where there is no central authority, anyone can download software and create a wallet without presenting ID, and payments can be made without any middleman’s permission.

Decentralized no more?
Another open question is to what degree the PBoC’s digital currency system may include the features of blockchain, if at all.

One of the earliest patent documents filed more than two years ago detailed that the central bank did at one point explore the idea of using a distributed network to manage nodes for verifying transactions.

“This technology would empower smart contracts on a blockchain infrastructure to dynamically manage nodes in the network to ensure they share and transact the same data with security and scalability,” the doc stated.

(From: https://www.coindesk.com/is-chinas-digital-fiat-a-cryptocurrency-heres-what-we-know )

If it is not a blockchain project, not a cryptocurrency and not a decentralized coin, then I tell you mate that whatever it is that china is creating is nothing inspired by bitcoin at all, I just see is china creating another digital payment coin, so they would just supported alibaba payment and just introduce this as their digital Yuan.

If it is not crypto, then the usage will mostly be limited to their citizens alone, and that would still not stop their citizens from using cryptocurrency since this coin they are creating cannot give them the benefit that people get from crypt, and they can never be able to take their mind away from crypto. The coin they are creating, will it at any point reward the holders? Will it be able to serve as store of value like bitcoin and some other coins that have enriched people?

If USA has PayPal then China will surely create something of their Own as they are building own world inside Asia and will soon dominant worldwide
They want to strengthen Yuan in another form to compete globally that’s why they are creating this electronic Fiat but until this wasn’t done then all of our comments here are speculation,though o truly believe that the are capable and ready to create something like this.so for the Chinese cryptonian out there please update in this thread any information and update regarding this as I believe this will have effect in our community here

The purpose of cryptocurrencies is possibltiy of transactions without any need to third parties. We want cryptocurrencies to be independent from banks when we make transactions.
If a government creates a crpytocurrency, the main advantage of that cryptocurrency is ignored. No government will create a cryptocurrency. They won't create something that make people independent from them.

The chief aim of cryptocurrencies is decentralization, I don't even think Libra is a cryptocurrency.

Nice input which i do see the same way.Any coins just masking out the word or face of cryptocurrency but the real thing into its back is a heavily centralized one isnt considered to be a crypto yet we know the main aim of these coins why its being created which is decentralization.If government or country does make their own coin using up blockchain tech but a heavily centralized one then its no different from traditional fiat system.

I think what really make a coin a crypto is because it is built with blockchain, but they can still operate in without anonymity, just like we still have lots of currencies in the market that cannot be classified as a decentralized coin but they are still cryptocurrency, look at tether and the rest of stable coins, all of these can never claim that they are decentralized because they are being controlled.

The only coins that I see fully working according to the plan of satoshi are privacy coins, and we have very few of them, so Facebook can still call their coin cryptocurrency without that anonymity because I feel that is also what china is also trying to achieve. They already have Alipay so there would not have been any need for them to create another payment system if it was not crypto.

It's China for God's sake, they already abandoned Bitcoin and chooses a lot of altcoins. They have a hate relationship on Bitcoin since 2017. As regards for their Digital Fiat, obviously it's not crypto and it functions like Libra coin, fully centralise with government back-up. So that alone doesn't fit the definition of crypto in my book. But that is ok, we know where China is coming from, they won't allow their people to have full control and freedom from within that Bitcoin gives. So they have to find a way to satisfy the Chinese people but at the same time, gain back the control. And besides, we haven't seen a "crypto' that is back up by the government succeeded so I guess history will decide.

China staying away from crypto has really helped it developed. I could remember in 2016 when China were influencing the crypto market through attacked by people’s bank of China and when I did not hear much from them in 2017 bitcoin was able to get over $1000 and since then till now it has been in the uptrend. I am happy that we could survive without help from China and if China has decided to have their digits currency that will reduce the power of bitcoin, I don’t think also that it should be a concern to us as for long she has been against it and not today.

Agreed 100% I don't see how or why people have started linking China's digital currency to Bitcoin or Blockchain. It is just another digital currency, only backed by a country, unlike Bitcoin or most cryptos. This currency would not be like Pedro, I think that's what has most people confused. China likes to have an iron grip over its currency, creating a decentralized digital currency would be so much against their nature.

You should not rely on the fact that China will create a decentralized cryptocurrency or accept Bitcoin and absolutely will not control them at all. We must not forget that this is a country with a rigid dictatorship of the Communist Party with full control of all areas of the country's economy. For those who did business with China, it is clear that this country is not like any of the European countries or the United States. All state coins will be centralized and will never have what Bitcoin has - decentralization and independence.

I think the new coin of China will not be any different from such coins as USDT, XRP and other centralized coins, and this was clear from the moment the news came out that China was planning to launch its own coin. That is why all decentralized cryptocurrencies will be popular and interest in them will grow.

I have heard that this statement is not true and China is not going to develop crypto-like digital currency for now.
But, I think that sooner or later this will happen, goverments need to have better informations about us. Where we pay, for what and to whom.

I'm afraid the appearance of another centralized digital coin will not be able to positively affect the cryptocurrency market. Although if China's policy regarding Bitcoin changes and it will be possible to use Bitcoin in China and exchange it for example for their state digital currency, then this will positively affect the entire cryptocurrency market.

In my opinion and adding up to all people are pointing out here I guess they had just let Yuan to be digitalized, But having said it is still operated by banks or backed up by their government it is still stable and just like what you have said it is not cryptocurrency so there is no sign that it will be a rival to Bitcoin and other cryptocurrencies, And it is on their own benefit and not outside of their country, Let just let that happen and hope for the best of their projects in giving their citizens a fast and reliable payment method, At least China doesn't rely anymore on Cryptocurrency or Bitcoin but instead they used their own to sought their problem.

None of those is a crypto currency, and it does not matter that Libra or China digital government currency is based on blockchain, but it is not decentralised. They can track every single movement and such currencies are nothing more than mobile banking.

It may come from many different ideas of electronic payment, online banking or government platform to throughly track their currency in an online application. It reciprocate that meaning of crypto in being decentralised since it's China. But in other country, I hope some government will be open in idea of using blockchain in being desentralized to show the transparency in their government in managing their funds.

So to be called a crypto it should be decentralized? Can't we called a centralized currency found on internet a crypto?

It should be encrypted with cryptographic element.  Whether it is decentralized or centralized is out of question,


you can read more about it here (https://blockgeeks.com/guides/what-is-cryptocurrency/)

Though I am still wondering if we can call a digital currency a cryptocurrency even though it does not have a blockchain but uses cryptographical function.

I guess that the creation of the coin is just a way to protect their digital currency and noting more, which china is very good at holding on to their power and that is why they have not lost owner for a long time now, and you know that when it comes to chain, they are very fast thinker and whatever they produce is always very useful.

The project will actually be a success because they have the population to see to that, just like Facebook has the population that would ensure that their project is a successful one also, but no matter the project they come up with, even with their popularity, bitcoin will always remain bitcoin because it is the only coin that I see run n decentralization for now.

Of course not.
Paypal, alipay, and other centralized e-currencies arent being runned on a blockchain.
Up until now there is no info regarding if China will run the digital yuan on a blockchain.

Paypal and Alipay are just money transmission platforms and they are not even a currency, hope you are not aware of that. All they do is to take your fiat currency and help you to transmit without you going to the bank and you only need blockchain if you are having your currency to track every transaction, coming up with a digital yuan is a different thing and coming up with a blockchain based yuan is a different thing, not sure whether the Chinese government is plannning something like that.

Yes, i am aware but we are talking about the money and not the platform and he was reffering to "internet money"
you can already store money in paypal and alipay making the money a e-currency.
I want to point to him that crypto is running on a blockchain while these centralized currencies doesnt need blockchain to run.

These platforms just provide digits and nothing else and once you withdraw they will send the remittance to your bank account. You can have centralized currency in the blockchain too, Ripple is one such currency, USDT also runs in the blockchain but they are all centralized currency and in the future we might see more centralized currency, saying this for your clarification ;).

No, not a cryptocurrency of course. It is a digital currency but never a cryptocurrency. China's digital fiat is a fiat currency. It is still the old renminbi in new clothes. Nothing has changed except that instead of being represented and spent by way of paper bills and metal coins, it is already in digital codes. But the value, the system that rules it, and all the rest of the features are still fiat.

I guess my definition of cryptocurrency is different what i knew was it should be decentralized and people cant freely add/remove coins.
The decentralization makes cryptocurrency unique which makes it different from other currencies

Yeah, i dont consider ripple, tether, and stablecoins as crypto since they can add and remove.

Clarification
You can use the money in alipay and paypal to pay for goods, services, and bills its not just for remittance.

If that is the case, then I think that china is as confused as the rest of the nations that don’t know what to do again to bitcoin after they must have realized that there is no way to kill bitcoin and having realized how people are so much in love with bitcoin usage including their own citizens also.

If they know what they are doing, they will not be creating any digital currency again for their coin when they already have some digital payment method already put in place like Alipay and WeChat. They need to stop hating bitcoin and stop wasting money creating a currency they know will not work. There is need for them to support bitcoin being a decentralized coin and has not negative effect on their already existing fiat because bitcoin only came to serve as an alternative.

I did not understand what you mean by freely add and remove coins, but the true meaning of decentralization means that the nodes will be distributed throughout and not just by having a few servers mining here and there, bitcoin network is a truly decentralized network as it is spread around globally.

So what do you call paying for goods and service  :P. It is just a third party payment platform and they do not have their own token or coin, you store your fiat currency in the platform and spend accordingly.

It is possible that the Chinese government will put the digital Yuan on the blockchain simply because it is easy to monitor the flow of money and to have more transparency and they like to have a complete control over their citizen and with the recent economic cold war between US they will come up with something that could challenge these restrictions.

I think that digital currencies from China such as the USD are making blockchain projects by producing USDT whereas for China I feel almost the same as that, if China can make such blockchain projects then a trade war can occur in the cryptocurrency world with and can provide price movements high at the exchange place.

They say, it will be like Facebook Libra, so, it will be a stable coin. However, most people take FB coin as cryptocurrency, so the new Chinese digital money can be also defined as crypto. China supposes that their virtual money will be the best answer to Libra and they take it as a part of the USA/Chinese struggle. They are sure, if Libra is finally, prohibited, they will certainly win this round.