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Aug 28
2019
Binance Research Examines What China’s Digital RMB Might Look Like


In a new report that looks into the expected characteristics of China’s proposed digital currency, Binance Research determines whether blockchain is used for this proposal and what it means to the general public.


Binance Research, the market research and analysis arm of Binance, has published a new report on the Chinese Central Bank Digital Currency (CBDC), the proposed digital legal tender by the People’s Bank of China. In the report, titled “First Look: China's Central Bank Digital Currency,” Binance Research stated that while the CBDC aims to improve monetary policy, it comes with concerns about potential risks and abuses of individual financial data.

The report also assessed how blockchain is used for the CBDC, which will be backed 1:1 by fiat reserves and equipped with manageable anonymity and encryption features. Based on recent details from PBoC-related entities, the CBDC will operate on a two-tier system for issuances and redemptions: 

  • First Layer: The PBoC would issue and redeem China’s CBDC via commercial banks. 

  • Second Layer: Commercial banks would be responsible for re-distributing China’s CBDC to retail market participants. 

The first layer was identified to be running on a permissioned blockchain system, while the use of blockchain remains undecided as the PBoC still hasn’t drafted a clear technical roadmap for its digital currency, according to Binance Research.

“Following Facebook’s recent Libra whitepaper release, the Chinese central bank accelerated its plans to launch its own digital currency amidst growing concerns about continued capital outflows that could weaken the renminbi (RMB),” Binance Research stated about the possible motivation for the PBoC to pursue the CBDC proposal.

The report identified some benefits of CBDC to China and its citizens, such as: 

  • The use of a "loosely-coupled" design, which would allow fund transfers without the need for a bank account.

  • The potential improvement of monetary policy, as CBDC allows the PBoC to map out a more comprehensive economic picture of all individuals and businesses across China. 

However, the report also points out the complications that will arise from the use of CBDC, such as concerns regarding potential curtails on individual financial privacy. Furthermore, it remains to be seen how the CBDC works with regards to cross-border payments, which involves various regulatory differences across countries.

Read the full report here. 

About Binance Research 

Binance Research provides professional, data-driven insights and analysis for investors in the crypto space to increase the level of transparency and improve the quality of information within the current crypto ecosystem. The team consists of professionals with a background and experiences in blockchain engineering, investment banking, strategy consulting, academic research and data science. For more information, visit: https://research.binance.com/