After years of a hate-love relationship with Bitcoin and other cryptocurrencies, China is finally responding to the forces of the crypto revolution. Although not fully into virtual currencies, China’s top bank, the Peoples’ Bank of China (PBoC), is reportedly developing its own digital currency.
However, the bank’s move to develop a digital Yuan is because of Facebook’s plans to roll out a cryptocurrency stablecoin, the Libra. Facebook, a social media giant, will use Libra to facilitate cross-border payments and which will be pegged to a host of fiat currencies.
According to the director of the bank’s research bureau, Wang Xin:
“If [Facebook crypto token] is widely used for payment, cross-border payments in particular, would it be able to function as money and accordingly have a large influence on monetary policy, financial stability, and the international monetary system?”
The Peoples’ Bank of China, is purported to have received a green-light from the State Council to involve other financial institutions in the development of a central bank digital currency.
Previous Attempts
Notably, this isn’t the first time the Chinese central bank is considering issuing a central bank-backed virtual currency. Towards the end of 2017, the bank was researching the viability of a central bank digital currency.
In 2017, Yao Qian, who led the research, said that:
“The development of the digital economy needs central bank-issued electronic currency more than ever. What the central bank has in mind is a centralized digital currency among all. As money has evolved from the barter system to its metallic and paper forms, it is now going digital.”
Qian added that a digital legal tender would act as a jewel in the crown of financial technology. Unfortunately, in 2018, PBoC seemed to have discarded the plans. Additionally, towards the end of 2017, China wreaked havoc on its crypto market by prohibiting crypto trading and mining. Before the ban, China hosted the largest percentage of Bitcoin miners.
India to issue a “Digital Rupee”
Interestingly, China seems to bring earlier cryptocurrency non-believers along with its digital currency plans. Now, India is following on China’s footsteps. According to a report published by an Indian lawyer, Varun Sethi, the Indian government is open to issuing a central bank-backed digital currency which it refers to as a “Digital Rupee.”
The report notes that “a Digital Rupee – digitally issued by the country’s Reserve Bank – would be approved by the Central Government as legal tender.”
However, as noted by the report, other virtual currencies that are not issued by the Reserve Bank of India (RBI) will be prohibited. The report is in the form of a draft bill, and it’s headed to the country’s parliament. The draft bill is titled “Banning of Cryptocurrency & Regulation of Official Digital Currencies.”
China and India Cryptocurrency Clampdown
In the same way China crippled its crypto market, India is on the same route. In a controversial draft bill, law makers say that, “no person shall mine, generate, hold, sell, deal in, issue, transfer, dispose of or use cryptocurrency in India.” Recently, it was revealed that India is seeking to impose a 10-year jail term for those found interacting with virtual currencies.
Notably, India was also a vibrant crypto market before the Reserve Bank of India prohibited the country’s financial institutions from providing services to cryptocurrency-focused firms. Consequently, crypto exchanges were among parties that went to court to challenge the RBI ban. Unfortunately, the Indian supreme court is yet to issue a ruling.
In what seems like a digital currency wave in the Asian continent, Iran is also planning to issue a gold-pegged cryptocurrency so as to stop relying on the USD. Just like in China and India, Iran had also issued a ban on virtual currencies before shifting camps following sanctions.
