Sky Guo, CEO of Cypherium, believes that the People’s Bank of China (PBOC) will not be able to track all transactions with the digital yuan due to technical limitations.
Due to the economic crisis caused by the pandemic, the issue of launching state-owned digital currencies has become particularly relevant for many central banks. The Central Bank of China is one of the leaders actively developing and testing its own cryptocurrency. However, Guo believes that even the most ambitious central banks willing to innovate may face technical constraints.
Despite the centralized management, most central banks will use blockchain elements when launching digital currencies. The NBK positions the digital yuan as a global currency, but according to the CEO of Cypherium, it will be too “cumbersome” for distributed ledger technology (DLT). Guo said:
“About 1.4 billion people will use the digital yuan. No blockchain can handle such a huge volume of transactions. The digital yuan will be centralized, but the government will not technically be able to control all transactions. Hundreds of thousands of transactions are conducted in China every second. If the authorities try to track them, it will take an incredible effort, so most of the work should be delegated to commercial banks.”
Guo noted that the testing of the state-owned cryptocurrency of China is quite successful. So, in the fall, the Shenzhen authorities, in cooperation with the NBK, distributed 10 million digital yuan to 50,000 residents through a lottery, and 88% of these coins were spent to pay for goods and services.
At the same time, the Chinese government has a negative attitude towards other cryptocurrencies. Last month, the NBK proposed changes to the law on the Central Bank of the People’s Republic of China, according to which it is prohibited to issue any tokenized assets linked to the digital yuan.
Recently, the governor of the Chinese central bank Yi Gang (Yi Gang) said that the digital yuan will accelerate the country’s transition to a digital economy, and this task is a priority for the state.