China is forging ahead to be the first country to offer its own digital cryptocurrency based on blockchain technology, following successful trials.
Despite instances of enormous fluctuation in price, cryptocurrencies such as bitcoin remain incredibly popular, thanks to its detachment from any nation state’s bank and its ability for users to trade anonymously.
For this reason, traditional banks and governments have been sceptical about its potential for undermining existing currencies.
Three years of research
Yet now, one of the world’s largest economies is throwing caution to the wind by potentially launching the world’s first national cryptocurrency under the People’s Bank of China.
According to Bloomberg, the Chinese government has been exploring the possibilities of cryptocurrencies for nearly three years, having set up a research team in consultation with digital firms such as Deloitte.
For the end user in China, services such as WeChat or Alipay would remain largely the same but transaction costs would be lower, as a state-run cryptocurrency would mean payments coming directly from the buyer.
This possible launch of a digital currency comes at a time when the number of Chinese people making online payments is continually increasing, from 200m in 2014, to an estimated 630m by 2020.
The core of the digital currency will be based around blockchain, the distributed ledger technology that has made bitcoin what it is today and could possibly revolutionise modern and future business.
‘Blockchain will change the whole infrastructure’
By using blockchain, China will be able to collect vast quantities of data on every transaction in the hope of better predicting monetary forecasts.
Larry Cao, director of content at the CFA Institute in Hong Kong, has described the move as revolutionary.
“Cutting costs is an obvious benefit, but the impact of shifting to blockchain-based digital money from the current payment structure goes beyond that,” he said.
“There’s a potential you can pay anybody in the system, any bank and any merchant directly. Blockchain will change the whole infrastructure.”
With plans to launch this cryptocurrency soon, China will replace a significant amount of its paper tender, with analysts predicting that banks and payment companies will need to radically rethink their business models in the years to come.