Yesterday, a report claimed that the People’s Bank of China (PBOC) will release the nation’s Central Bank Digital Currency (CBDC) to seven institutions, possibly as soon as November. In comments to Forbes Paul Schulte, the former global lead for financial strategy at China Construction Bank, claimed the firms are his previous employer, the Bank of China, the Agricultural Bank of China, the Industrial and Commercial Bank of China, Alibaba, Tencent, and UnionPay.
A second anonymous source, a previous employee of the Chinese government, confirmed those institutions will receive the CBDC. They hinted at one further recipient but did not share its name. This source also suggested that the currency could launch on November 11, Singles Day – an important date for China as the busiest shopping day of the year.
The banks named by Schulte are no big surprise; they are known as the Big Four state-owned banks of China and are the largest in the world by assets. Alibaba, the B2C and B2B marketplace giant, and Tencent, a gaming and social network firm, already have blockchain projects on the go. Tencent owns WePay and Alibaba owns AliPay via Ant Financial. Between the two they are the dominant Chinese digital payment apps. Meanwhile, UnionPay is the Chinese state-run payment card network and the biggest in the world by transaction value.
Yesterday’s report fits with the comments made by Mu Changchun, Deputy Director of the PBOC, earlier this month. He confirmed the two-tier structure, where the central bank will first issue the CBDC to other institutions, which will then circulate it among their customers.
Mu also claimed that the CBDC was “ready”, but didn’t give a set timeline. Now we know it could be out by the end of this year. Indeed, Schulte commented: “China is barreling forward on reforms and rolling out the cryptocurrency. It will be the first central bank to do so.”
The anonymous source added that the PBOC hopes that its digital currency would be issued to Western banks in the future and hence available to many more spenders. “That’s the plan, but that won’t happen right away,” they said.
This claim is interesting because one of Mu’s concerns was that China’s renminbi would become internationalized. But, he made clear that the CBDC would be purely monetary; a cash-replacing store of value with no complex smart contracts or interest payments. So perhaps this simplicity would allow it to compete internationally.