GUANGZHOU, China- Interest in China's digital Yuan project could be in part driven by the declining price of bitcoin, Chinese central bank said on Thursday, even as the cryptocurrency is effectively banned in the second largest economy in the world. China's digital yuan is an example of a digital currency by central bank that aims to replace some of the cash in circulation. The People's Bank of China sees it as a way to advance cashless payments. It is effectively a digital version of the fiat currency; since 2014, the central bank has been working on a digital currency since 2013. Previously speaking to reporters, Wang Xin, Director of the Research Bureau of the PBOC, said market interest in the digital Yuan is very strong and everyone is paying close attention. On one hand, this is related to more and more local digital banks around the world participating in the development of domestic digital currencies, Wang said according to a Mandarin translation of a CNBC comment. A number of world digital banks are exploring issuing their own national currencies in Japan, the U.K. Sweden and Switzerland. On the other hand, China is arguably the largest in terms of the increase in the price of bitcoin, Wang said. In the past few months, the Bitcoin price has repeatedly hit record highs.
It has more than doubled this year alone, but China's digital yuan is not like bitcoin. The latter is a so-called central bank which means it has no central authority- such as a decentralized cryptocurrency- to control it. Bitcoin is also on a technology called blockchain and it's unclear at this point what the digital yuan will be based on. Over the past few years, Chinese authorities have cracked down on bitcoins. In 2017, Beijing banned so-called digital coin offerings, a way to issue new tokens and raise money. The government also cracked down on businesses involved in the cryptocurrency exchanges, such as exchanges.
Last month, China's Inner Mongolia region banned new cryptocurrency mining projects in a push to reduce its energy consumption. So far, the PBOC has not given a timeline for the digital rollout of the nationwide yuan. It has carried out a number of real-world pilot projects in cities around China.