Well, that’s an interesting turn of events. China’s central bank, the People’s Bank of China (PBoC), revealed that its central bank digital currency (CBDC) “can now be said to be ready“.

The new CBDC will not be available to the public and will not compete with commercial bank deposits. It will be used by the PBoC and commercial banks for settlement of transactions. This may increase transparency of the Chinese banking system and create some stability.

The People’s Bank of China is the upper level and the commercial banks are the second level. This dual delivery system is suitable for our national conditions. It can use existing resources to mobilize the enthusiasm of commercial banks and smoothly improve the acceptance of digital currency.

Mu Changchun, Deputy Chief in the Payment and Settlement Division of the People’s Bank of China.

Tracing non-anonymous digital currency transactions on a centralized ledger is trivial. In context of China, a CBDC would enhance the monitoring and tighten the government’s control over the financial system.

In comments to the press, PBoC officials remarked that the development of the CBDC was partially in response to Libra. This can not be reconciled with the fact that the CBDC was being developed for the last five years. However, Libra, if widely successful, may indeed be a danger to China as it would be pegged to US dollar.

China exercises a tight control over the cryptocurrency markets. Bitcoin and other cryptocurrency exchanges and Initial Coin Offerings are illegal, and Chinese financial institutions have been prohibited since 2013 from holding any form of digital currency. Owning and mining Bitcoin by the public is however permitted. In a recent court case involving Bitcoin, the Chinese courts also recognized bitcoin as property.