The People’s Bank of China’s (PBoC) chairman, Zhou Xiaochuan, recognize that the development of digital currency is “inevitable”.
When asked if the central bank considered using blockchain technology for digital currency, Zhou Xiaochuan said in an exclusive interview with Caixin Weekly:
“The technologies of digital currency can be divided into two types: account-based and non-account-based. These two technologies can co-exist by being applied to different layers. Block chain is one option. It is non-account-based and non-counterfeiting, and features distributed ledgers. If a digital currency wants to emphasize privacy protection, block chain technology is a good choice. The PBC has spent a lot of time and energy researching on the application of block chain technology.”
However, Zhou did also point out that blockchains have consumed too many computation and storage resources, “and cannot handle the current transaction volume.”
Nevertheless, Zhou did not rule out the possibility of implementation of blockchain technology, but they will wait and see if this problem can be solved in the future. In the meantime, they will continue to pay attention to blockchain technology and so far “the PBC’s digital currency research team has made in-depth studies on digital currency related technologies such as mobile payment, trusted and controllable cloud computation, cryptographic algorithm and secure chip.” They are looking into “all kinds of innovative technologies, to improve the technical framework for issuing and circulating digital currency.”
At the National People’s Congress 2018, Zhou Xiaochuan also shared his views on digital currency. While he made it clear that bitcoin is not recognized as a legitimate payment method, he did say that China is paying close attention to the technologies behind bitcoin.
“We also pay high attention to the application of technologies like blockchain and distributed ledger,” said Zhou
Even though Zhou did not rule out any potential development of a digital currency, he is afraid that “if they [blockchain and distributed ledger applications] spread too rapidly, it may have a big negative impact on consumers. It could also have some unpredictable effects on financial stability and monetary policy transmission,” said Zhou.