Holders of China’s digital currency would not receive interest payments

As China prepares to launch its digital currency, the central bank official has revealed more details on China’s digital version of Yuan.

Addressing a forum in Hong Kong, Mu Changchun, the head of the central bank’s digital currency research institute, told that the digital currency is designed to substitute existing coins and paper money and holders of the currency would not receive interest payments. This would mean there would be no implications for inflation or monetary policy. Source: Reuters.

He added China will adopt a two-tier approach with its digital Yuan issuance. It will first issue the digital currency to commercial banks and other institutions, who will then distribute to the Chinese general public.

Much like a horse race, Institutions will compete to provide the best services using the new form of money. “The front runner will take the whole market – who is more efficient, who can provide a better service to the public – they can survive in the future”, Mu Changchun said.

Read More: Seven institutions to receive China’s state-backed digital currency

The digital currency would also integrate with China’s popular mobile payment platforms – Tencent, WeChat and Alipay. It is expected that China may start the issuance later this year or early 2020.

In Sept, China’s central bank official shared that its design would bear similarities to Facebook’s Libra currency. It would strike a balance between allowing anonymous payments and preventing money-laundering, allowing Chinese regulators closer oversight over money flows than they currently have.