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Report: China’s Upcoming CBDC Does not Need Bank Accounts for Transfers

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China CBDC

Users of China’s Central Bank Digital Currency (CBDC) will not need bank accounts to transfer the coin. Binance’s research arm, Binance Research unveiled this information on August 28 through a report. Per Binance research, transfers without bank accounts will be possible because of the CBDC’s loosely coupled design.

According to the report, the People’s Bank of China (PBoC) aims to improve the efficiency of its monetary system through the CBDC. On top of this, the bank aims to increase the renminbi’s (RMB) turnover rate and its global reach. Seeing as the CBDC would not its users to have bank accounts, the currency would introduce some semblance of anonymity.

Utilizing Smart Contracts

Per sources familiar with the bank’s operations, the CBDC would use a two-tier system for issuance and redemptions. Unlike most crypto coins, China’s CBDC would be fully centralized.

Explaining how this system would work, Binance Research noted,

On the first layer, the PBoC would issue and redeem China’s CBDC via commercial banks. On the second layer, commercial banks would be responsible for re-distributing China’s CBDC to retail market participants. Yet, on this second layer, the use of blockchain remains undecided (“blockchain as an option”) as the PBoC still hasn’t drafted a clear technical roadmap for its digital currency.

Reportedly, the PBoC believes that the adoption of smart contracts could add value to the CBDC. As such, its offering would turn into a security. Consequently, the currency’s usability would decrease. Also, it would hinder the bank’s goal of internationalizing the renminbi (RMB).

China’s CBDC will Not Go Live in November

Before this news, an anonymous source claimed that China’s CBDC was ready for launch. The source went on to state that the currency would be available as early as 11 November, this year.

However, the PBoC came out to clarify that it won’t be launching China’s CBDC in November. The bank made this statement, refuting the claims of launching the currency on November 11, China’s bare sticks holiday. Per PBoC, these claims were “inaccurate speculation”.

This news comes after Zhou Xiaochuan, the former PBoC governor said that the bank should rethink its plan for launching a national digital currency. Per Xiaochuan, Facebook’s Libra poses a threat to the Chinese monetary system. He noted that while Libra would help developing countries, it would crash existing cross-border payment systems. On top of this, Xiaochuan believes the coin would weaken national currencies.

He went on to state that the Chinese government should, “make good preparations and make the Chinese yuan a stronger currency,”.

Do you think the use of China’s CBDC without bank accounts will help the currency reach mass adoption quickly? Let us know in the comments below.

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