China is reportedly
starting to pilot it’s Central Bank Digital Currency (CBDC). Yesterday
Beijing News published an interview with a former regulator where he suggested that China’s DC/EP (digital currency / electronic payment) could increase competition between commercial banks.
The DC/EP is designed as a multi tier system to reduce the risk of the People’s Bank of China crowding out commercial banks. It’s meant to be a replacement for cash, so commercial banks will use some of their money on deposit at the central bank to purchase digital currency. The banks will then distribute the currency to end users.
Because the digital currency is meant to mimic cash, it won’t initially offer interest, which will still make bank deposits attractive.
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