Crypto exchange Binance released a new report that says China’s digital currency will most likely be a two-tiered framework replacing notes and coins in circulation.
The report, issued August 29, asserts that renminbi fiat will back 1:1 the central bank digital currency (CBDC) of People’s Bank of China (PBOC), along with following a two-tiered organized framework with the bank, retail market participants, and commercial banks.
The first layer will link the PBOC with commercial banks for currency redemption and issuance.
The second tier will link those commercial banks with a more enormous retail market. A technical roadmap – including the addressed use of blockchain innovation – has yet to be published, Binance stated.
Binance asserts the PBOC’s framework may permit fund transfers without the necessity of a bank account.
“The end goal for the CBDC is to display a turnover rate as high as cash, while achieving ‘manageable anonymity,'” Binance stated in the report. “In other words, in the first-layer network of the CBDC, real-name institutions are expected to be registered while the transfer in the second-layer network would be anonymous from the perspective of users.”
The two-tiered framework might offer assistance to the PBOC method as many as 300,000 transactions per second, presently not conceivable with blockchain technology. Binance stated smart contract design has also been tackled.
The PBOC’s new digital currency might cover “general-purpose, account-based” money and central bank digital tokens under the Bank of International Settlements’ money taxonomy.
The PBOC’s CBDC is designed to replace China’s notes and coins in circulation, also known as the M0 money supply. In other words, the CBDC isn’t purposed to replace funds inside the central bank or cash holding institutions.
Binance mentioned interbank clearing, retail payments, and cross-border installments as viable reasons for replacing the M0 with a CBDC.