Here Comes China’s Crypto-Currency
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Another fledgling crypto-currency is looking to make its mark. Unlike Bitcoin, which just soared past the price of gold, and other altcoins, this crypto-currency has the backing of an entire nation.
The Chinese government is busy converting its national currency, the Renminbi (RMB), to a digital currency. It could rollout as early as this year and may point to decreased need for credit information in the country.
One does not simply convert paper money into ones and zeros on a distributed ledger, so how will this work?
Working closely with China’s Ministry of Finance, the People's Bank of China (PBOC) could roll-out its blockchain-based currency, and end the paper-based RMB, through two methods.
The PBOC could transact directly with the country’s banks, making the banks responsible for transactions with businesses and consumers. Or, the PBOC could go directly to the public and banks with its digital currency, managing all technology and services. It’s more than a logistics problem, though. Domestically, China must deal with adoption.
While most China’s population is online, it is far from 100%. A digital currency will require that all its citizens have access. Internationally, it appears as if China is acting alone, which is fine, if it doesn’t plan any transactions with its crypto-currency outside its borders, but that is not the case.
As global trade with China continues apace, such an overhaul of its currency could send global commerce and foreign-currency exchange into a state of disruption. For the greater information industry, this means both threats and opportunities.
In terms of threats to the information industry, there may be less need for credit information in China. If all consumers and businesses are transacting via crypto-currency, they can only transact with money that they have.
On the up side, tax and accounting settlements will be instant, and third party screening for risk and compliance will be greatly enhanced, given visibility of transactions and apparently addressing money laundering, bribery, corruption, and terrorist funding.
China’s centralised control of innovation policies has enabled the country to develop and test numerous fintech solutions at a mind-boggling pace. The UK and US may be great innovators in fintech and social media, but China, with its non-existent privacy acts, may perfect them sooner.
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