Top cryptocurrency exchange Binance released its own predictions about China’s forthcoming stablecoin.
Forbes on August 27 reported that China plans to create a central bank-controlled digital currency of its own as soon as mid-November. While a newspaper under the control of the Chinese Communist Party denied that date, Forbes was told that the launch of the renminbi-denominated “DC/EP” cryptocurrency had been accelerated in light of Facebook’s planned Libra stablecoin. Regulators and elected officials around the globe have slammed the Libra plan as a potential threat to their own central bank-issued fiat currencies.
The digital currency to be issued by the People’s Bank of China (PBOC) will be backed one-to-one by the renminbi and be based on a two-tier system in which commercial banks would purchase the digital currency and distribute it into the market, according to a report released by Binance on August 28. Forbes was told that it would also be distributed through large “trusted” companies including tech giants Alibaba and Tencent.
Notably, Binance said that the PBOC has not yet committed to launching its sovereign digital currency on a blockchain. But the bank’s top officials did say at the China Finance 40 Forum that the new currency was “close.”
The exchange noted that its report was based on “key discussions in China by different public stakeholders and…various publicly available information, which has been released so far.” The central bank itself has not made any statement, Binance’s report added.
A key point it makes is that a Chinese virtual currency would enable the country to internationalize its renminbi. This would increase the currency’s influence around the globe in the midst of a punishing trade war with the U.S.
Global influence is a major goal of China’s leadership. The country is in the midst of a massive and long term plan to expand its influence with the Belt and Road campaign, building major infrastructure projects in some 130 countries, many of them developing nations.
Another point made in Binance’s report is what it calls “manageable anonymity.” One part of this is that in order to achieve a turnover rate as high as cash—which Binance calls an end goal of the PBOC’s digital currency—a bank account would not be necessary. Transfers at the user level of buyers and sellers “would be anonymous from the perspective of users,” Binance reported. “[C]oncerns remain owing to potential risks and abuses of individual financial privacy.” [All emphasis by Binance.]
While the report doesn’t say so, the Chinese government is not likely to want its digital currency to have the potential anonymity of bitcoin (BTC) and other traditional cryptocurrencies, to say nothing of so-called “privacy coins” like monero (XMR).
As for its own Venus digital currency project, Binance co-founder He Ye told Bloomberg on August 29 that the company has learned from Facebook’s Libra disaster, and intends to make sure it doesn’t blindside regulators.
“If we want to launch Venus in a country, we’ll make sure it complies with the regulations,” He said. “[T]he company will take a ‘more conservative’ approach,” putting a priority on working with regulators even over technical development.
Binance plans to back its own stablecoin with a basket of currencies and securities. And like Facebook, it plans to create an independent consortium of companies that will take control of Venus.
The company has had its own troubles, the article noted, pointing to Binance’s decisions to pull out of Japan and China to avoid further friction with regulators. That still puts it orders of magnitude below Facebook’s clashes in the United States and European Union, which announced fines for privacy violations of about $5 billion and $2.2 billion, respectively, in the last few months.
With a number of stablecoins already on the Binance Chain, He said the company would likely create a new, open-source blockchain for Venus. And rather than being a single coin, Venus will create local stablecoins denominated in and backed by local currencies.