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China Takes a Progressive Step with State-Backed Cryptocurrency

China’s central bank is planning to launch a state-backed cryptocurrency in November. This new cryptocurrency will be issued to seven institutions in the coming months, according to a former employee of one of the institutions who is now an independent researcher.

Paul Schulte, who worked as the global head of financial strategy for China Construction Bank until 2012, named the Industrial and Commercial Bank of China, the Bank of China, the Agricultural Bank of China, Alibaba, Tencent, Union Pay and an association of Chinese banks, as the institutions that will receive the cryptocurrency initially.

An eighth institution could also be among the first tier of recipients adds a separate source, who is involved in the development of the cryptocurrency, dubbed DC/EP (Digital Currency/Electronic Payments).  The source refused to reveal the name of the additional company.

The source, who previously worked for the Chinese government, preferred to stay anonymous, but confirmed that the technology behind the cryptocurrency has been ready since last year. The source added that the cryptocurrency could launch as soon as November 11, on China’s busiest shopping day, known as Singles Day.

According to the source, at the time of the launch, the recipient institutions will be responsible for dispersing the cryptocurrency to 1.3 billion Chinese citizens and others doing business in China’s fiat currency, the renminbi. The source also informed that the central bank hopes the currency will eventually be made available to spenders in the United States and elsewhere. This will be accomplished through relationships with correspondent banks in the West. That is the long term plan for the currency.

The plan to use a diverse set of China’s trusted intuitions to disperse the cryptocurrency has a striking resemblance to several other ideas currently going around the world. For example, Facebook’s planned Libra cryptocurrency will supposedly be backed by a basket of currencies issued by central banks and support from companies like Uber and Mastercard in the United States, Mercado Pago in Argentina and Vodaphone in England. And last week, Bank of England governor Mark Carney floated the idea of replacing the U.S. dollar as the global reserve currency with a new currency backed by a number of central banks.

According to Schulte, what sets China’s DC/EP apart from Carney’s “synthetic hegemonic currency” (SHC) and Facebook’s Libra, is that while SHC doesn’t appear to have gone much further than Carney’s mind and Libra is still just early-stage computer code, the Chinese cryptocurrency is ready to launch. Schulte, who now runs an eponymous bank research firm says “China is barreling forward on reforms and rolling out the cryptocurrency,” and adds that “It will be the first central bank to do so.”

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About Shreya Kapoor

20 y/o budding journalist, with a tinge of good vocabulary.

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