The PBOC did not respond to a faxed request for comment on the Forbes story, although Sina.com said that the report was “inaccurate speculation” citing an unnamed source close to the central bank.

China’s central bank is expected to distribute its digital currency through the big four state-owned banks – the Industrial and Commercial Bank of China, China Construction Bank, the Agricultural Bank of China, and the Bank of China – and mobile payments systems Alipay and WeChat Pay, as well as UnionPay, the state-supported credit card provider, according to the Forbes report. Alibaba is the owner of the South China Morning Post.

“The People’s Bank digital currency can now be said to be ready,” said Ma on August 11.

Former central bank governor Zhou Xiaochuan said last month that, in addition to central banks, “commercial entities” should be allowed to issue banknotes backed by their own private currency assets, although he did not elaborate on what kind of “commercial entities” might be appropriate to issue a digital currency in China.

China is also ready to make Shenzhen a pilot zone for digital currency as part of plans for the city to become a socialist model city, according to a statement summarising a meeting between the Shenzhen party secretary Wang Weizhong and central bank governor Yi Gang released on Thursday.

The PBOC implemented a blanket crackdown in China on trading of cryptocurrency, including bitcoin, which are not backed by any government, viewing them as risks to China’s financial stability and security. At the same time, in 2014 the central bank created its own academy to study digital currencies and the related blockchain technology.

Neil Woodfine, director of marketing at blockchain start-up Blockstream, said a digital currency created by the PBOC would be “just like cash” and “would be fully controlled by the central bank.”

“If it’s digital instead of physical, they can close accounts and monitor all activities [in the entire financial system]. Commercial bank deposits are difficult for them to monitor, control or pull information out of for verification because the numbers are in each bank’s data centre,” Woodfine said.

Leonhard Weese, the president of the Bitcoin Association of Hong Kong, said that a government-backed digital currency may enhance the PBOC’s control of China’s monetary system, cutting reliance on commercial banks to transmit changes in monetary policy.

“It would be similar to just killing the commercial banks,” Weese said.

Central banks, however, have expressed interest in launching their own digital currencies to counter the US dollar and to gain more control of their own monetary systems.

Mark Carney, governor of the Bank of England, argued last week that the US dollar, the current dominant reserve currency, could be replaced by a global digital alternative to tackle ultra-low interest rates.

A digital currency “could dampen the domineering influence of the US dollar on global trade”, Carney said last week at the US Federal Reserve’s annual conference, adding that a digital currency has the edge to counter shocks emanating from the US through trade and exchange rates.

Daniel Wang, chief executive and co-founder of blockchain start-up Loopring, said that a Chinese government-backed digital currency may provide a new way for the yuan to compete globally.

“If the central bank wants to increase the global competitiveness of the yuan through its digital currency, only an open and standard-based competitor carries any hope,” said Wang.

A digital yuan would “remain a sovereign currency under a centralised sovereign,” continuing to require the trust from users in the Chinese central bank and government institutions behind it, Wang added.

Alfred Schipke, senior resident representative for China at the International Monetary Fund (IMF), said that the bank is “open” to digital currencies, including the one being developed by China’s central bank.

“We don’t have a specific view on a particular currency, we haven’t looked at the details of the latest proposals from China,” Schipke said on Thursday. “The IMF in principle is looking at these things favourably. It’s a two-way process where we learn from China, which is often at the forefront of development.”

Blockstream’s Woodfine said that Beijing’s move also reflects a growing concerns among central banks that a financial disaster is on the horizon.

The 30-year US Treasury bond yield fell to an all-time low 1.976 per cent on Thursday, while yields around the world also plunged to multi-year or record low, triggering rising fears over a global recession.

Central banks around have also been driving down interest rates, with the PBOC recently unveiling a key interest rate reform that effectively cuts borrowing costs for companies to boost its slowing economy.

“We’ll see a move by governments and central banks to take back control over the financial system and use that power to direct their economies, continuing to pump money into the system to keep it afloat,” Woodfine added.

“A digital currency would be the perfect channel for helicopter money,” he said in reference to the idea that a central bank could stimulate the economy by giving out large quantities of money to the public, as if dumped from the sky. “They can send out free money to consumers.”