The currency will replace money issued directly from the central bank and follow a “two-tier system,” with the People’s Bank of China (PBoC) issuing tokens to financial institutions that will then distribute them to clients. The digital fiat currency has been in the works since 2014, said Mu Changchun, deputy director at the Payment and Settlement Department of the PBoC, over the weekend. Mu said the bank has been working “overtime” to get the currency ready, in light of recent “external factors.” (Technode)
Talking point: The announcement follows Facebook’s reveal of its digital coin, Libra, in June, which it plans to launch to the public in 2020. Chinese central bank officials expressed concern that Libra and other digital coins could create international currency competition that could threaten financial sovereignty. Governments around the world, including Canada’s, have called for more information on the coin. Beijing has maintained a ban on digital tokens, while its central bank develops its own. The Foundation for Defense of Democracies, a Washington-based think tank, noted in a July report that China and other U.S. adversaries could develop and use sovereign tokens to avoid dealing with the U.S. dollar and help safeguard against the effects of American sanctions.