Last week, China surprised the rest of the world with the issuance of a digital Renminbi. By doing so, the Chinese government became the first mover on the road to a digital central bank currency (CBDC) in form of blockchain-based units of national currency. Even though the project right now is limited to parts of the salary payment of government officials of the city of Suzhou and is supported by the Chinese payment company Alibaba, the Chinese central bank already plans to extend the program in May. So China sets a tremendous pace when it comes to the implementation of a national cryptocurrency. According to the currently available information, the implementation of the Crypto Renminbi is supposed to facilitate the traceability of transactions as well as the supervision of payment flows. The Chinese government therefore takes the expected path with the implementation of its blockchain-based national currency.
TECHNICAL DESIGN OF THE CRYPTO RENMINBI MOSTLY UNKNOWN
Right now, there is little information available about the digital version of the Renminbi. Especially information regarding the technical design of the national cryptocurrency is sparse. Because the Crypto Renminbi is supposed to broaden the monitoring options of the Chinese government, it seems likely that the financial privacy within this system will hardly be protected. This circumstance even leads to a disadvantage over scriptural money from the perspective of the users. Information about the current balance, payment flows and specific usage of scriptural money are generally remain with the payment service providers and those are subject to the banking secret. Even though payment service providers under German law have to disclose this information to government authorities in specific cases, a justifying reason is always required for this. This justifying reason can be e.g. probable cause for money laundering or terrorist financing. In a blockchain-based system without privacy features every transaction is openly visible on the blockchain. Furthermore, everybody being technically in the position to read the blockchain can also see the current balance of every blockchain address.
ADAPTION OF THE CRYPTO RENMINBI UNLIKELY IN THE WESTERN WORLD
The monitoring possibilities that the Chinese government has over the Crypto Renminbi regarding the specific use, the current wallet balance and transaction history according to the currently available information will probably lead the western world to not adapt the crypto Renminbi when dealing with Chinese businesses. It has to be expected that the Crypto Renminbi will stay a purely Chinese phenomenon and means of payment. Nevertheless, the implementation of the Crypto Renminbi should motivate the international community to issue further versions of blockchain-based national cryptocurrencies.
Attorney Lutz Auffenberg, LL.M. (London)
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Attorney Lutz Auffenberg, LL.M. (London) at the book launch party for the commentary work “Crypto Assets”. -
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