China and UK’s Planned Digital Currencies Appear to Have Little in Common
As major central bank digital currency (CBDC) projects develop apace, it is becoming clear that not all digital coins will look, or even function the same way.
A recent analysis by Chinese financial media group InterChain Pulse reveals that two of the most visible such projects — those of the Bank of England (BoE) and the People’s Bank of China (PBoC) — may be more different than they are alike.
InterChain Pulse cited BoE’s discussion paper released earlier this month, where the financial institution seriously weighed the pros and cons of issuing a CBDC denominated in pounds sterling.
InterChain compared the provisions set forth in the bank’s report with those of the PBoC and concluded that the two have significant differences in their design.
Unlike China, where the central bank will be the issuing authority of the CBDC, Great Britain has assigned the issuance of its CBDC to the parliament. Moreover, China is working on the digitization of its national currency, the yuan, while Great Britain is planning to create a competitive payment system.
Compared with the digital currency of the PBoC, another significant difference is the application of smart contracts to ensure transactions. The Chinese central bank’s digital currency currently does not support this type of operation.
The BoE’s CBDC will comply with anti-money laundering (AML) provisions, the financing of terrorism and sanctions procedures, and be compatible with the General Data Protection Legislation.
The PBoC’s CBDC must comply with the AML provisions and the bank’s own privacy rules.
InterChain Pulse noted some similarities between the two projects, the most notable being that neither will be based on distributed ledger technology. As both will be used for transactions, BoE and PBoC are developing networks that concentrate on supporting a very high transaction frequency.
Additionally, InterChain Pulse states that neither network will recognize a private digital currency.
Recent patents shed light on China’s digital yuan
As Cointelegraph recently reported, patents from Chinese payments platform Alipay — which is working on the CBDC project — have revealed some details about the digital yuan’s features.
Among them, Alipay itself will be a secondary issuer of the currency, while wallet functionality can be determined by behavior and personal data.
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