Digital Currency/Stablecoin/Tokenization Series: Heads-Up on Chinese National Cryptocurrency

The Chinese Government authorities are working on the ‘Digital Renminbi’ themselves as the U.S. Department of Treasury affirmed China as a ‘Currency Manipulator’.

Chinese yuan (CNY) has constantly been depreciating and CNY has dropped in the past after the PBoC fixed the USDCNY very close to 7.00 (actual: 6.9996) handle, reflecting the cautious mood among market investors.

In the meantime, the PBoC (People’s Bank of China) issued a statement in a response to the US' labelling China as "currency manipulator". The Chinese central bank defended that the CNY depreciation is largely due to change of market conditions, and blamed that the US accusations are groundless. While they made an announcement of approval from the state administrative authority to start working on a national digital currency in order to combat the uncertainty of Libra, as per the Chinese reports.

As per a research report from crypto exchange Binance, China’s digital currency will most likely be a two-tiered system replacing notes and coins in circulation.

The report claims that the PBOC’s digital currency (CBDC) would be backed 1:1 by renminbi fiat as well as follow a two-tiered structured system with the bank, commercial banks, and retail market participants.

The mechanism is designed in such a way that the network is equipped to deal about 300,000 transactions per second. Last year’s Singles Day peak volume of all transactions in China was 92,771 transactions per second, which was well within the DC/EP limits, because it is not completely backed by the blockchain architecture, the DC/EP is centrally managed by Chinese financial authority.