China is about to shake the global finance industry with its launch of the world’s first major sovereign e-currency. As it turns out, much of the research that went into development of the “digital Renminbi” has been taking place in the Greater Bay Area.
A senior central bank official announced over the weekend that the PBOC will issue its digital currency soon, following five years of research and development. According to a report from Caixin Global, the PBOC will not use blockchain technology, which underpins cryptocurrencies such as bitcoin, but will instead stick to a centralized management model. Issuance will be “two-tier”, i.e., the PBOC will issue the currency to commercial banks, which will then lend it on to customers. Much thought and research went into this decision, and there will be other ways in which blockchain technology may be used in the future with digital payments and other kinds of systems.
In finding whom to thank for all of this, the country needs only look south. To the Shenzhen Financial Technology Company.
Founded in 2018, Shenzhen Financial Technology (SFT) is a subsidiary of the Central Bank Digital Money Research Institute. Its operations include fintech development, technical consultation, tech transfer and construction and maintenance of fintech-related systems.
SFT was one of the key players in a project launched last September, known as “Greater Bay Area Finance Blockchain Platform.” Its ambition was to build an “open finance ecology” for China “and the world,” according to the 21stCentury Business Herald.
SFT led the effort, together with the PBOC’s Shenzhen Branch and five commercial banks –Bank of China, China Construction Bank, China Merchants Bank, Ping An Bank, and Standard & Chartered – as well as a curious choice: BYD, the Shenzhen-based electric-vehicle champion.
The consortium’s focus has been on providing a blockchain-powered underlying architecture for trade finance. With the platform, users can conduct multiple trade and financing activities under real-time supervision by regulators.
Although the sovereign digital currency will not be based on blockchain, Shenzhen’s pilot project has been seen as largely responsible for the success of the PBOC’s breakthrough with its plans to launch a digital currency. The research has been groundbreaking, and the Central Bank Digital Money Research Institute has already applied for 74 patents based on its results. SFT is expected to continue to focus on the development of at least six major patents. These include plans for a digital currency transaction payment registration method and system as well as an apparatus for targeted use of digital currency and exchange of digital currency, according to an account by Asia Crypto Today.
These patents demonstrated a level of urgency for the PBOC to establish efficient settlement systems for banks on blockchain, said the crypto-focused media. A successful deployment can give companies efficient industry-level blockchain solutions at a national level.