China adopts cryptography legislation when giving up digital currency

BEIJING (Reuters) – China's mostly rubber stamp parliament has passed a new law on cryptography when the country surrenders to launch its own digital currency, state media reported late on Saturday.

China's central bank set up a research team in 2014 to explore launching its own digital currency to cut costs by circulating traditional paper money and increasing politicians' control over the money supply.

China's proposed new digital currency will bear some similarities to Facebook Inc's Libra coin and could be used across major payment platforms such as WeChat and Alipay, a senior central bank governor said last month.

China's cryptography law, which comes into force on January 1[ads1], is aimed at "facilitating the development of the cryptography business and ensuring the security of the web site and information," Xinhua official news agency said, citing parliament. The law states that the state encourages and supports the research and application of science and technology in cryptography and ensures confidentiality.

Facebook's proposed cryptocurrency has raised concerns among global regulators that it could quickly become a dominant form of digital payment and a money laundering channel given the social network's large cross-border reach.

The Libra will be a digital currency backed by a reserve of real-world assets, including bank deposits and short-term government securities, held by a network of custodians. The structure is intended to promote trust and stabilize the price.

Similar to other cryptocurrency, Libra transactions will be run and recorded by a blockchain, which is a shared ledger for transactions maintained by a network of computers.

China's President Xi Jinping said last week that the country should accelerate the development of blockchain technology as a core for innovation.