This year 2019 has been very hectic for governments around the world in terms of Blockchain technology. Facebook's announcement of the future launch of its own virtual currency, Libra, generated fears in the vast majority of governments and regulatory institutions around the world.
To this day, governments have enjoyed an undisputed monopoly over the monetary policy of their countries. The issuance of currency, the definition of interest rates, and all aspects that define the instrument that citizens of a society will use to acquire goods and services, are regulated by the State institutions.
Therefore, the emergence of cryptocurrencies was a blow to this basically indisputable hegemony of governments over the economy. However, they had not yet faced a threat of the magnitude of the launch of Libra, a currency backed by more than 20 world-class companies, and that could provide Facebook with unusual power over international finance.
It is for this reason that many countries have already announced regulations and obstacles against the launch of the Facebook currency. Among these, the acceleration of the projects of different governments to launch their own virtual currencies, which can provide the same advantages that Libra would give, but keeping monetary policy under government control.
Among these currencies, the most important due to the size of the economy that will support it, is the virtual currency of China, which has been tracked and has been targeted for weeks, after the announcement of Libra.
Now Binance, one of the most important cryptocurrency exchange in the world, has released a report giving details about the future operation of what is already known as virtual yuan.
According to this report, the Chinese virtual currency would be backed by the physical yuan in a 1: 1 ratio, and can be used without having a bank account through a two-tier system. The first level would work by connecting the Bank of the Chinese People (PBoC) to the Chinese central bank with commercial banks for the issuance of virtual yuan, and their redemption by physical yuan.
The second level would connect these commercial banks with the large Chinese retail market, that is, with the individuals and companies that make life in this country. The transactions would be monitored by the Chinese authorities, but anonymous to the users of this virtual currency.
The PBoC aims for the virtual yuan to perform up to 300,000 transactions per second, an impossible figure for the other cryptocurrencies currently. I would also continue to consider how to include smart contracts in your system.
This opens the door to debate. Is it possible for governments to provide all the advantages of cryptocurrencies, while maintaining control over the economy? It is certainly a possibility, which, although complex to see at this moment, the digital yuan puts on the table and will require all possible attention from us.
