Although the long-awaited DC/EP (Digital Currency/Electronic Payments) state-backed crypto is far from the surface of the Chinese economy, its major distributor and issuer, the People’s Bank of China, announces what they call a ‘Special Financial Bond’ for small business loans using PBoC’s distributed ledger, most likely on which the DC/EP will be also hosted when launched.
The central bank revealed in an online statement that the two-year fixed-rate bond will have a coupon rate of 3.25%, and it aims to provide special financial aid to SMEs in China.
PBoC which is one of the largest lending institutions in the country has already issued 20 billion worth of yuan (approx. $2.84bn USD) in special financial bonds that shall be available through the bank’s domestic blockchain.
Read More: Hong Kong and Thailand Launching Blockchain-Based Settlement Network
While the moves suggest a positive stance for China when it comes to the digital economy of the Asian superpower, Xinhua predicts that the funds raised through the PBoC DLT will be mostly used to extend traditional loans to unbutton the collars of small businesses and give a breath to the ‘real’ physical economy.
Statistical data reveals that PBoC’s inclusive financial strategy is particularly focusing on small businesses, considering the balance of the bank’s loans to SMEs was surpassing 400 billion in yuan at the end of Q3 2019, spread across 410,000 small businesses, indicating a 35% growth of state-investments from the end of the last year.
PBoC claims to have solely used its ‘indie’ developed blockchain for the issuance of the new bonds, adding one more use-case to the global blockchain-powered financial management system.
Other international banking institutions have previously used blockchain technology to issue, manage, and securely distribute securities, collateral debt, and other paper assets that were subject to inefficient and time-consuming protocols of the past.
The Deputy Director at the People’s Bank of China, Mu Changchun had previously said that PBoC’s blockchain and in extension its upcoming DC/EP token are tailored for “small-scale retail high-frequency business scenarios” and it won’t be following the traditional crypto-hype.
As a matter of fact, while blockchain technology was publically praised by the leader of the Communist Party, Xi Jinping, Bitcoin and other cryptocurrencies are not really popular among Chinese officials at the moment.
Changchun added that private companies will be preferred over blockchain companies and public DLT providers to participate in the development of the DC/EP as long as they are subject to regulations, and serve the public interest with high moral standards.
DC/EP was the first state-backed cryptocurrency publically announced shaking the world into considering cryptos, stablecoins, and gov-controlled digital currencies as a competitive must.