The China Central Bank has revealed many facets of its Central Bank Digital Currency in a newly released whitepaper, one of the plans in the whitepaper is that the PBOC will utilize smart contracts for digital currency.
The digital version of the Chinese Yuan is also called e-CNY. By using smart contracts, the digital Yuan will allow self-executing payments. However, these sorts of payments will rely on some conditions that the contracting parties will agree on.
Usually, developers build smart contracts on the blockchain. Although, the People’s Bank of China hasn’t yet disclosed whether the digital Yuan will also use blockchain technology.
Instead, the whitepaper mentioned that the currency is based on digital signatures, encrypted storage, and digital certificates to ensure that transactions are secure and there’ll be no double-spending.
This latest news indicates that the China bank will be leading the pack in integrating smart contracts with a Central Bank Digital Currency. According to the whitepaper, integrating smart contracts will help to boost the “business model innovation.”
Smart Contracts And Hardware Wallets
Another piece of information in the whitepaper is that users of the Digital Yuan can also store it on different tools. Some of these storage tools include hardware wallets and software wallets that will base on “security chips.”
Also, the whitepaper suggested that users can add components to wearable objects, mobile phones, and Internet of things devices to increase the security of their storage devices.
According to the PBOC, they will focus on securing personal data and ensuring that the transactions are private. To achieve that, the e-CNY will collect lesser information for its transactions than what is attainable in traditional electronic payments.
Moreover, the whitepaper also stated that they wouldn’t share transaction data with third-party firms or government agencies.
Though, they can only disclose to regulatory authorities if there’s a law supporting it. But these statements in the whitepaper contradict what the media says about the digital Yuan. According to the media, China might use the currency to monitor its citizens.
In the whitepaper also, the bank mentioned that it would protect the privacy of small transactions but will trace high-value transactions. The reason is to check the larger transactions for compliance with government regulations for money laundering and tax evasion.
China’s Struggle Of Introducing CBDCs
The People’s Bank of China has been making the plan to launch a CBDC since 2014. The Bank formed a committee then to study the technology and is finally achieving its goals.
Even though China hasn’t rolled out the Digital Yuan for all the cities in the country, they have done many tests with it. From this whitepaper, the bank has disclosed its readiness to launch the currency for the whole country.
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Apart from China, other Central banks are also looking into their own CBDC. Moreover, countries like the US are actively researching the option.
For instance, the US has joined hands with MIT to look into the technology. But they are still not sure if a digital dollar will be the best option.
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