Following a successful central banking digital currency (CBDC) trial, the Chinese district of Suzhou has signed a memorandum of understanding with Cypherium, the enterprise-focused blockchain platform, which will help to build products within the ecosystem. Suzhou is one of the pilot cities involved in China’s attempt to circulate digital currency electronic payment (DCEP), with its regional GDP recorded as in excess of 1.85 trillion Yuan in 2018. This puts it seventh in size for large and medium-sized cities in China.
In recent months, the state-owned Chinese banks have been conducting internal, hypothetical-use tests of the People’s Bank of China digital currency in the city however, the most notable step forward has been the decision to issue workers in the city with DCEP. This has led to a successful trial period within the area.
Therefore, the announcement to partner with Cypherium, signed during Suzhou International Elite Week which aims to foster an international epicentre of innovation and create an ‘entrepreneurship week that never ends’, is significant.
Cypherium is focused on the interoperability of digital currencies. It is an enterprise-focused blockchain platform with established partnerships with all the tech giants – Google, Microsoft, Amazon and IBM and has now developed the world’s first cross-chain interoperability solution for China’s new Central Bank Digital Currency. This will enable CBDCs to be able to communicate with their international counterparts as well as their domestic industries and wholesalers.
The CEO of Cypherium, Sky Guo, said: “Securing the MOU with Suzhou is a significant step forward for Cypherium. As a pioneering city for China’s blockchain revolution, Suzhou is the perfect proving ground for our interoperable solution. By harnessing the Cypherium smart contract platform, Suzhou will be able to build forward-thinking blockchain products, avoid compatibility issues, and encourage innovation within the city—furthering its goal to become China’s foremost blockchain hub.”
And while Cypherium has its thoughts firmly focused in China right now, Guo believes that it won’t be long before others follow. The Fintech Times caught up with him to ask just how this part of the industry will evolve.
What have been the driving factors behind starting a framework?
Simply put, no adequate framework exists yet, and the Cypherium team is capable of producing one. By bringing together developers from Microsoft, Google, Amazon and Huawei, who are really passionate about blockchain, we formed a team for Cypherium and started development. The Cypherium DCIF is a novel approach to the challenges facing the adoption of Central Bank Digital Currencies (CBDCs). Any attempt at digitizing public money will soon have to reconcile the many functionalities of national currencies not yet mandated by private-sector digital ledger technologies. A fully functional CBDC will have to interact with a wide range of private sector industries as well as other national economic systems. Cypherium’s Digital Currency Interoperability Framework enables these necessary connections.
It is a novel approach that consists of six major bodies: two clearing banks, CypherLink (a notary mechanism cross-ledger interoperability framework), Cypherium Connect (a third-party plug-in module for banking systems), Cypherium Validator (a verification machine), and finally the users. This structure maintains the autonomy and integrity of the central banks by allowing them neither to directly carry their users, issue or distribute CBDC units, nor supervise the transfer of CBDCs. This critically protects the banks, and, in turn, the national economies they support.
How can the CBDC approach be applied globally?
Curiously enough, that piece might take care of itself. Because the global financial system is so interconnected in the twenty-first century, and because digital payments have become so much cheaper, faster, and more efficient, adoption should be exponential and competitive among central banks. We have already seen national banks in China, France, the Netherlands, among many others, begin to adopt digital currencies. This is a decisive step into the future, and it seems inevitable now that within ten years we will have widespread adoption of central bank digital currencies. What remains to be seen is how this new framework will inform the coming decentralized revolution of blockchain tech. How will CBDCs look upon Bitcoin and private blockchains? How will an on-chain contract find validity in a given national legal system? Frameworks like Cypherium’s aim to scale solutions to these questions.
Are there any good examples of digital currencies or banking innovations in this area that you believe set a precedent?
One of the best precedents for interbank digital frameworks is Ripple. From its inception in 2012, Ripple has demonstrated a clear understanding of the shortcomings in our current global financial system, as well as an effective analysis of how to address those issues from a business development standpoint. Ripple’s success has far surpassed any other blockchain or DLT in the banking sector. However, from a technological perspective, Ripple cannot fulfil the total needs of a public blockchain, which must be able to digitally interact with other banks and cryptocurrencies in a secure way. Stellar, another Jed McCaleb project, addresses this interestingly, but we believe Cypherium’s Digital Currency Interoperability Framework gives the most robust answer to these technological questions.