Why China’s Digital Renminbi is Not Embracing Blockchain

Understanding China’s Digital Renminbi

The digital renminbi, or RMB, is set to revolutionize how China handles currency, but it looks like blockchain may not be on the guest list. Joe Lubin, the Ethereum co-founder and CEO of ConsenSys, recently shared insights in an interview that highlight the Chinese central bank’s approach to this new digital currency.

Decentralization? Not Really

In an intriguing discussion on CNBC, Lubin explained that the People’s Bank of China (PBoC) sees little value in the decentralized nature of blockchain technology. “There’s no real reason,” he stated, indicating that the government’s aim is strict control rather than liberation from it. This means the CBDC (Central Bank Digital Currency) will likely emphasize transactional efficiency over decentralized trust.

What Does the PBoC Want?

According to the PBoC, the digital RMB aims to track money flow and assist in monetary policy. So, while the chance for using cryptographic principles from blockchain exists, the concept of decentralization seems to be off the table. Lubin points out that if the system involved multi-party operations, there might be some benefits to adopting a fuller spectrum of blockchain functionalities, but for now, it’s more about digitization.

Maintaining Control, Not Eroding It

There’s a bit of speculation around whether the digital RMB could enhance governmental oversight. Lubin calmly plays down this concern, suggesting that the central bank already maintains a significant level of control. “I think the central bank and the government have very significant control already,” he quipped. The CBDC will more likely support existing powers rather than introduce a new level of surveillance.

The Two-Tier System

The structure of the digital RMB will follow a centralized, two-tier approach: the PBoC is at the helm, while domestic commercial banks will operate the second tier. Yang Dong, from Renmin University, noted that testing is underway for cross-border functionalities, but don’t expect a decentralized utopia anytime soon.

Global Implications

With heavyweights like the Vice-Chairman of the China Center for International Economic Exchanges predicting that China could spearhead the world in rolling out a CBDC, it’s essential to keep an eye on how this digital currency unfolds. As regulations tighten—like the recent cryptography oversight law—it’s evident that China is gearing up for a significant push into the digital currency space. This move might set the stage for future international currency competition.

Conclusion: A Curious Case of Control

While decentralization is the ethos behind blockchain, China appears focused on marketing a digital currency that amplifies its existing control over the economy. The CBDC’s implementation will provide some intriguing insights into how countries balance control and innovation. As for blockchain’s role? It might just be a fancy tech term gathering dust on the shelf.