China could start rolling out its digital currency within the next few months, according to the managing partner of an investment firm backed by Foxconn Technology Group, CNBC reported.
China has developed a framework called the Digital Currency Electronic Payment or DCEP that would allow its central bank to issue a digital currency to commercial banks and third-party payment networks by Alipay and WeChat Pay, explained Jack Lee.
“So, they already have all the system and the network ready. I think you will see it very soon, in the next maybe two to three months,” Lee told CNBC’s Tanvir Gill at the Singapore FinTech Festival.
He said the launch could start as a trial – not to replace physical money completely.
HCM Capital has invested in a number of blockchain startups, according to Reuters. It’s backed by Taiwanese electronics manufacturer Foxconn, which also invested in Japanese firm SoftBank’s $100-billion Vision Fund, Reuters said.
Several experts have warned that virtual currencies could increase the risk of fraud, particularly money laundering and terrorism financing. But many governments have not found a way to regulate the space.
Daniela Stoffel, Switzerland’s state secretary for international finance, said the expected launch of China’s digital currency could push authorities around the world to decide how they want to use and regulate such technology.
“If the governments now realize that this is now really actually happening, and the question and challenges that are implied in an e-currency are now real, I hope this will lend further momentum to decisions on a global basis,” Stoffel told CNBC’s Tanvir Gill.
In addition to regulation, the potential rise in digital currencies would bring about questions on the roles of national currencies and central banks – something that should also be discussed internationally, Stoffel said at the Singapore FinTech Festival.
China is not the only country that has looked at issuing digital currencies. In Switzerland, the Swiss National Bank said last month it’s working with the country’s stock exchange to examine the possible use of such currencies in trading.
Facebook’s libra
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, VOA reported.
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, a professor at the London School of Economics, 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.”
Anonymity
The digital yuan will not fully control people’s information and will provide them with required anonymity in their transactions, according to an official.
“We know the demand from the general public is to keep anonymity by using paper money and coins … we will give those people who demand it anonymity in their transactions,” said Mu Changchun, head of the digital currency research institute at the People’s Bank of China (PBoC), at the Singapore FinTech Festival on Tuesday, Reuters reported.
Mu added that the central bank would keep the “balance between the ‘controllable anonymity’ and anti-money laundering, CTF [Countering Financing of Terrorism], and also tax issues, online gambling and any electronic criminal activities.”
Mu continued, “That is a balance we have to keep, and that is our goal. We are not seeking full control of the information of the general public.”
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