Former governor of People’s Bank of China Zhou Xiaochuan recently admitted to a local media news outlet that it is imperative for the Chinese CBDC to find use in retail and remittance payments.
Zhou Xiaochuan is one of the most influential economists, bureaucrats, and reformists in the country, but he is best known for his long term service as the governor of the People’s Bank of China (PBoC). After fifteen years of carefully manoeuvring the country through financial ups and downs, he decided to step down last year. However, his ability to speak straight from the shoulder and take a rather bold stance over the most sensitive topics is what makes him admirable.
The first goal for Chinese CBDC – Retail adoption
During his recent interview, he emphasized the broader adoption of digital currency and blockchain. He insisted that one of the ways to ensure his higher acceptance rate is by adopting it in retail and remittance. And while that may be true, he was also quick to ascertain that PBoC’s move to launch Chinese CBDC is not aimed at undercutting the Renminbi’s significance. Fiat currencies are a symbol of a country’s sovereignty and have vital importance in the economy, he asserted.
Therefore, he added, central banks, especially of the countries that take pride in absolute authority, must be cautious of what direction blockchain and state-backed digital currencies take in their countries. One wrong move could lead to a credit crisis or losing public trust in financial institutions.
In China, according to him, the Chinese CBDC and blockchain should have two primary focuses. One is the widespread adoption in the domestic retail realm, and the other is the cross border payments involving inter-financial institution settlement.
Xiaochuan summarized that the retail industry in China stands to benefit immensely from digital currencies and electronic payment systems. Once it is underway, it is only a matter of time that the digital currency electronic payment (DCEP) expands its reach to cross-border settlements for banks and financial institutions, he explains.
Why the rush?
And for those who have wondered why PBoC digital currency adoption as indispensable, one possible reason is the ability it gives to the government to track cash transactions and thereby curtailing money laundering and terrorist financing activities.
In the long term, the central bank digital currency could also streamline financial transactions that potentially reduce China’s exposure to US sanctions and dependence on its financial institutions.
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