Study shows major differences between China and the UK on central bank digital currency design

As central bank digital currency (CBDC) projects rapidly evolve, we are discovering that not all digital currencies have the same functionality.

New analysis from InterChain Pulse shows that the two most visible projects – the digital currencies of the Bank of England (BoE) and the People’s Bank of China (PBoC) – could be very different.

InterChain Pulse cited a document released by the Bank of England earlier this month, in which the institution carefully weighed the pros and cons of issuing a pound-denominated CBDC among financial institutions.

InterChain compared the regulations in the bank's report with those of the People's Bank of China and concluded that there are major differences in their design.

In China, the central bank will be the issuer of the CBDC, while the UK has assigned the issuance of its CBDC to Parliament. In addition, China is working on the digitization of its national currency, the renminbi, while the UK is planning to build a competitive payment system.

Another major difference compared to the PBOC’s digital currency is the application of smart contracts to secure transactions. The Chinese central bank’s digital currency design currently does not support such operations.

The Bank of England’s CBDC will comply with anti-money laundering (AML) regulations, terrorist financing and sanctions procedures, and be compliant with the General Data Protection Regulation.

The People’s Bank of China’s CBDC would have to comply with Anti-Money Laundering Regulations and the bank’s own privacy rules.

InterChain Pulse also noted some similarities between the two projects, notably that neither is based on distributed ledger technology. Since both will be used for transactions, the Bank of England and the People’s Bank of China are developing networks that support very high transaction frequencies.

Additionally, neither network will recognize private digital currencies.

Previously, Alipay’s patent had revealed some details about the functionality of the digital RMB. Alipay itself will be the second issuer of the currency, and the wallet function can be determined by behavior and personal data.

Source: Cointelegraph