Based on Ripple, the Chinese central bank is calling for interoperability between different CBDCs

Alex Dovbnya

China urges central banks to ensure the interoperability of their future digital currencies with a set of common standards

Mu Changchun, head of the research department for digital currencies at the People’s Bank of China, emphasized the importance of interoperability between different digital currencies of the central bank (CBDCs) during a seminar by the Switzerland-based Bank for International Settlements.

Interoperability should be enabled between Central Bank Digital Currency (CBDC) systems in different jurisdictions and exchanges.

As reported by U.Today, the blockchain company Ripple recently published a white paper aiming to discourage central banks from focusing exclusively on domestic use cases while calling on them to develop “collective protocols”.

Each individual CBDC can create its own set of rules and guidelines that best suit its home market. However, CBDCs should also be united and follow collective protocols that allow them to work seamlessly with other CBDCs and digital currencies.

This is exactly what Changchun, who led China’s digital currency project in September 2019, proposed. The PBOC tries to develop a universal set of rules for CBDCs:

The flow of information and the flow of funds should be synchronized to make it easier for regulators to monitor transactions for compliance.

China’s CBDC will coexist with other payment systems

While there is no tentative date for the introduction of the digital yuan, PBoC has already conducted several trials in major Chinese cities.

During the seminar, Changchun also mentioned that the CDBC could act as a “backup” for China’s ubiquitous mobile payment apps like Alipay and WeChat Pay, without ultimately replacing electronic wallets.

If China’s CBDC finds widespread acceptance for conducting international business, it could potentially turn the hegemony of the US dollar, which has been the world’s reserve currency since 1944, on its head.

However, Changchun stressed that CBDCs should not disrupt the stability of the global financial system.