Yao Qian, a former director of the PBOC’s Digital Currency Research Institute, claims that a central bank digital currency can run on the Ethereum network.
In theory a digital yuan or digital dollar could sit on Ethereum’s network
He spoke about operational architecture-related issues that could affect CBDCs, including the digital yuan, and claimed that countries around the world were gravitating toward two-tier models for their digital currencies. In theory, via a “two-tier” approach, a digital yuan or digital dollar could sit on Ethereum’s network, or that of the Facebook-backed Diem (formerly Libra). That would mean central banks could provide CBDCs directly to users without needing intermediaries.
Yao told the International Finance Forum 2021 Spring Conference in Beijing, however, that the number of security incidents arising from smart contract vulnerabilities shows the technology still needs to mature. Further, there are concerns over the legal status of digital contracts.
Yao led the central bank’s digital currency research lab from its inception until he left the PBoC in 2018, moving to the China Securities Regulatory Commission at the end of 2019. He is cited as author or co-author on many of the central bank’s patent applications relating to CBDC technology.
Traditional finance experimenting with Ethereum is nothing new
On April 27, European Investment Bank launched its first digital bond on a decentralized public blockchain. The issue was announced and executed specifically for the registration and settlement of digital bonds placed on a public blockchain. The EIB digital bonds were issued on the Ethereum blockchain. The release of the EIB digital bonds on Ethereum is a clear sign that there is interest in experimenting on the Ethereum network and Yao Qjan acknowledging the possibilities with CBDC’s on Ethereum shows there is another use case for the network.