A former Bank of China executive has shown his support for digital currencies, positioning it as a substitute for cash, widely known in economic circles as M0.
Ex-vice president of China’s central bank, Wang Yongli, said that digital currencies should substitute all currencies “as much as possible”. The push for digital currency:
“shouldn’t be confined to such substitution; otherwise, its market competitiveness could be problematic,”
,he said. Yongli is the present director of the Haixia blockchain research institute and previously served at the People’s Bank of China (PBoC) for over 25 years.
The former banker said that the new digital currency can reshape monetary mechanisms, the Global Times reported. According to him, possible options for creating the new digital currency framework could be to set up exclusive “basic accounts” on the PBoC’s digital currency platform for all social entities.
This will enable the bank to supervise digital currencies without causing a huge impact on the current financial system. Yongli proposed that the bank will improve the maintenance of monetary and financial stability by preventing excessive money issuance.
His comments follow the PBoC’s recent developments to digitize its currency and ramp up the “digital Yuan” release. However, Cao Yin, managing director of the Shanghai-based Digital Renaissance Foundation, addressed several security concerns involving the hasty idea.
Cao Yin cited possible drawbacks against the quick substitution of liquid cash with central bank digital currencies (CBDC).
“The nation still needs cash reserves and there are user scenarios in which the use of cash still takes hold, particularly among the older population.”
,Cao Yin told the Times.
Yin also addressed the possibility of CBDCs being at risk of malicious attacks and over-issue in cases of hacking. He added that the substitution of CBDCs would require more than the current cash handling to ensure secure payments.
China is making progress with the digital yuan, thanks in part to large companies joining the initiative as partners in testing and implementation. For example, the country’s ride-hailing platform, DiDi Chuxing, recently climbed aboard to test China’s Digital Currency Electronic Payment system.
Additionally, the central bank is piloting its digital currency on platforms operated by Tencent-supported food delivery service firm Meituan Dianping.