China’s CBDC to combat US dollar supremacy says ex PBoC governor

Zhou Xiaochuan stated that the Chinese DCEP is meant to prevent dollarisation in the country

Image of The People’s Bank of China headquarters, Beijing
The PBoC has been working steadily on the development of the CBDC for years

Zhou Xiaochuan, the president of the Chinese Finance Association and the former governor of the People’s Bank of China (PBoC), believes that the country’s approach to digital currencies is in favor of its domestic retail system, and that it will prevent the dollarisation of the economy.

Xiaochuan informed attendees at a Eurasia Forum conference on October 27 that the focus of the central bank in creating their own central bank digital currency (CBDC) is markedly different from that of the countries in the Group of Seven (G7), which are the US, the UK, Canada, Germany, Italy, France, and Japan.

According to him, the G7’s biggest concern was with “the challenges raised by Libra, Bitcoin, and similar digital encrypted currencies,” while the central bank of China was more focused on using its digital currency for retail payments domestically and stopping the US dollar from turning into a more common medium of exchange in the country.

“In China, we’ve [been working] very hard to push the DCEP — that’s the digital currency — and the electronic payment. However, the focus and the major point of our concept and the content are different from the G7 principle.” he stated.

“We [need] to prevent dollarization. This is one of the major designing points of the Chinese DCEP.” he added.

The central bank of China recently launched a pilot program to test the viability of the digital yuan by giving away $1.5 million to 47,500 people in the city of Shenzhen. While the CBDC has not yet been formally released by the PBoC, the institution has already drafted a law providing for the regulatory framework and legitimacy of the digital currency.

China is working on officially issuing the digital yuan before the Winter Olympics in Beijing this February 2022.

There has been an increasing interest in CBDCs around the world, and the Bank for International Settlements recently informed Cointelegraph that it was working with seven central banks to provide a definition for the foundational principles that are necessary for any publicly available CBDCs to help central banks meet their public policy objectives.

The report clarified that it does not have opinions regarding the launch of any CBDCs or firm plans for the asset.

“This report is not about if or when to issue a CBDC. Central banks will make that decision for their jurisdictions (in consultation with governments and stakeholders). None of the central banks contributing to this report have reached a decision on whether or not to issue a CBDC,” it explained.