(Yicai Global) March 8 -- China's central bank has edged closer to becoming one of the first, after the Vatican, Japan, Ecuador and the UK, who are also mooting their own cryptocurrency,to issue a sovereign, centralized digital currencyafter trialing its prototype.
Using blockchain, the technology that enables digital asset exchanges, the People's Bank of China would be able to trace and record data on transactions in real time and make frequent policy updates, leading to a new era of high-precision money management.
PBOC assembled a team, including experts from Deloitte Touche Tohmatsu Ltd. and Citigroup Inc., to look into the possibility of a sovereign digital currency and potential applications in 2014. The bank said its alternative currency was coming "soon" in January 2016, but gave no timeline. China Finance published a PBOC research paper outlining how a national bitcoin-like money system could work later in the year.
The Paper described a plan in which the central bank would make digital money and distribute it to commercial banks. Individuals and merchants would be able to store, transfer and deposit funds using mechanisms similar to popular Chinese mobile payment platforms, such as Alibaba Group Holding Ltd.'s [NYSE:BABA] Alipay and Tencent Holding Ltd.'s [HKG:0700] WeChat Wallet.
Ecuador was the first country to use a state-run electronic payment system when it launched the Sistema de Dinero Electronico, or 'electronic money system,'in 2015. Sweden, Canada, Germany and several other countries are considering using their own digital currencies.
"Talking about the impact of digital money now is like trying to predict how the internet would transform lives in the 1980s," said Duan Xinxing, vice president of OKCoin Co., one of China's biggest bitcoin exchanges. "We know it's going to be huge. It has the potential to change the entire economic infrastructure. We're just not sure about when and how."