Cypherium CEO Sky Guo believes the People's Bank of China (PBOC) will not be able to track all digital yuan transactions due to technical constraints.
Due to the economic crisis caused by the pandemic, the issue of launching government digital currencies has become especially relevant for many central banks. The Central Bank of China is one of the leaders actively developing and testing its own cryptocurrency. However, Guo believes that even the most ambitious central banks ready to innovate may face technical constraints.
Despite the centralized management, most central banks will use blockchain elements when launching digital currencies. The NBK is positioning the digital yuan as the world currency, but according to the CEO of Cypherium, it will be too “cumbersome” for distributed ledger technology (DLT). Guo said:
“The digital yuan will be used by about 1.4 billion people. No blockchain can handle such a huge volume of transactions. The digital yuan will be centralized, but the government will not technically be able to control all transactions. Hundreds of thousands of transactions take place in China every second. If the authorities try to track them, it will take incredible effort, so most of the work would be worth delegating to commercial banks. "
Guo noted that testing of China's state cryptocurrency is going well. Thus, in the fall, the Shenzhen authorities, in cooperation with the NBK, distributed 10 million digital yuan among 50,000 residents through a lottery, and 88% of these coins were spent to pay for goods and services.
At the same time, the Chinese government has a negative attitude towards other cryptocurrencies. Last month, the NBK proposed amendments to the law on the Central Bank of China, which would prohibit the issuance of any tokenized assets tied to the digital yuan.
Recently, the governor of the Chinese central bank, Yi Gang, said that the digital yuan will accelerate the country's transition to a digital economy, and this task is a priority for the state.