The People’s Bank of China (PBoC) Digital Currency Research Lab has submitted 41 patents since it opened a year ago in June 2017. All of these patents focus on creating a new type of cryptocurrency that combines the benefits of cryptocurrency with the needs of the financial system.
The PBoC is the central bank of China and is in charge of nationwide monetary policy and regulation of financial institutions. It is one of the largest banks in the world with USD 3.2 trillion of reserves. If a cryptocurrency were to be launched and officially endorsed by the PBoC, it could easily become the top cryptocurrency in the world by market cap and volume. As of 27 June 2018, Bitcoin has a relatively small market cap of USD 105 billion and trading volume of several billion dollars per day. If PBoC invested a small fraction of its reserves into the new cryptocurrency, it would easily overtake Bitcoin.
According to the PBoC, its primary goal is to “break the silo between blockchain-based cryptocurrency and the existing monetary system”, so the new cryptocurrency will be designed to easily integrate across the existing financial system. In the end, it would be the same financial system as before, except with cryptographic security and an immutable blockchain ledger, increasing efficiency and trustworthiness.
The 41 patents filed so far each describe a different aspect of the new cryptocurrency, including wallet software. The latest patent describes how users can check all previous transactions on the blockchain via the wallet.
Speculation is that China could have banned most cryptocurrency trading and forced major Bitcoin exchanges Huobi and Binance out of the country so that it could clear the way for a PBoC-backed cryptocurrency, and have full control of all exchange activity for the new cryptocurrency.
Fortunately, one of the patents describes how, even though this new cryptocurrency would be issued by the central bank, it would be held by users in a decentralized manner, making it a true cryptocurrency and not a centrally-controlled digital ledger. At the same time, the cryptocurrency would be more centralized than Bitcoin since China is seeking a hybrid between decentralized and centralized, possibly like EOS which has a somewhat centralized governing structure.
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