China’s digital yuan will leverage smart contracts and built against Alipay-like payment platforms developed by the privately owned conglomerates, said former People’s Bank of China director Yao Qian.
At the International Financial Forum in Beijing, Qian argued that simulating its physical counterpart would not be enough for the digital yuan to succeed. To take full advantage of digitality, it will move towards “smart currency” through the use of smart contracts, he added, according to local sources.
Central banks need to innovate legal fiat money to keep up with the tides of digitization, he said. Qian then listed the European Central Bank, Bank of Japan, and Central Bank of Canada as examples of working with smart contract-based digital currencies.
Qian reportedly said China’s original idea of a digital yuan was to counter the impact of private payment platforms that are becoming increasingly popular, possibly suggesting the country’s ubiquitous payment service, Alipay. However, he insisted that the Chinese government did not develop the digital yen as a monitoring tool to keep track of all transactions in real time:
“The digital yuan must strike a balance between protecting user privacy and fighting crimes such as money laundering, tax evasion and financing terrorism.”
Central banks can provide users with digital currencies without intermediaries “if the digital dollar and the digital yen run directly on blockchain networks like Ethereum and Diem,” Qian said. Through layered operations, the central bank’s digital currency can bring better benefit and financial inclusion to bankless people, he added.
Yao Qian is the director of the Science and Technology Supervision Bureau of the China Securities Regulatory Commission. He was previously director of PBoC’s Digital Currency Research Lab. He has been known for his work on the digital yuan since his first steps in 2014. His friendly attitude towards Crypto as an official of the Chinese SEC counterpart earned him the nickname “Chinese Crypto Dad”.