In a recent speech, Di Gang, deputy director of China’s central bank Digital Currency Research Institute, said the central bank is exploring using blockchain at the issuance layer of its central bank digital currency (CBDC).
China is pretty advanced in its CBDC pilots, but its core digital yuan system is centralized. It’s a two layer system with the central bank controlling the core layer using conventional technologies and banks acting as intermediaries in the same way they do for cash. And banks can use smart contracts for programmable money.
The People’s Bank of China chose a conventional technology approach for CBDC because of the immaturity, performance, and scalability challenges that blockchain presents. Although Di Gang said it is exploring distributed ledger for issuance, he reiterated these shortcomings, saying blockchain is not appropriate for high concurrency, high performance and strong privacy.
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