China urges central banks to ensure interoperability for their future digital currencies with a set of common standards
Mu Changchun, the head of the People’s Bank of China’s digital currency research unit, stressed the importance of interoperability between different central bank digital currencies (CBDCs) during a seminar held by the Switzerland-based Bank for International Settlements.
Interoperability should be enabled between CBDC (central bank digital currency) systems of different jurisdictions and exchanges.
As reported by U.Today, blockchain company Ripple recently published a white paper in which it aims to dissuade central banks from focusing solely on domestic use cases while urging them to develop “collective protocols.”
Each individual CBDC can create its own rules and policies that best suit its domestic market. However, CBDCs should also be united and guided by collective protocols that will enable them to cooperate seamlessly with other CBDCs and Digital Currencies.
This is exactly what Changchun—who spearheaded China’s digital currency project in September 2019—has proposed. The PBOC is seeking to develop a universal set of rules for CBDCs:
Information flow and fund flows should be synchronized so as to facilitate regulators to monitor the transactions for compliance.
China’s CBDC wants to coexist with other payment systems
While there is no tentative date for the digital yuan’s launch, PBoC has already conducted several trials in major Chinese cities.
During the seminar, Changchun also mentioned that the CDBC could serve as a “back-up” for China’s omnipresent mobile payment apps, such as Alipay and WeChat Pay, without ultimately replacing electronic wallets.
If it sees wide adoption for conducting international trades, China’s CBDC could potentially upend the hegemony of the US dollar, which has been the world’s reserve currency since 1944.
Changchun, however, stressed that CBDCs are not supposed to disrupt the stability of the global financial system.
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