The first step to establishing a digital currency in China is to develop the required infrastructure. China has a huge potential to develop its financial system through digital currency. Although the Chinese government has not yet officially launched DCEP, it has begun testing the new digital currency in several cities. Eventually, it plans to link users’ electronic wallets with their bank cards so that they can conduct transactions and transfer money. However, as a national product, DCEP will be regulated by the central government.
The country’s PBOC is also exploring the possibility of using digital tokens as a means of exchange. While other central banks are also investigating this option, China is moving much more rapidly than others. This could have important implications for global standard-setting. But if the Chinese government is successful, it will soon become an important factor in the adoption of digital currency worldwide. And in the meantime, other countries may follow suit.
In 2014, China became the first major economy to investigate the idea of digital currency. But since then, it has yet to launch its digital yuan, which would fall under the authority of the People’s Bank of China. China also maintains a blanket ban on trading in cryptocurrencies, as they view them as a source of financial risk. If it does finally launch digital currency, it will be an important factor in the digital currency race.
In addition to establishing a national payment system, China has a plethora of payment platforms. Among them are Alipay and TenPay, which processed more than 1.2 billion transactions in 2018 alone. These companies also own over 100 major urban small and midsized banks. And with more than one billion e-CNY users, it could be a valuable addition to China’s payment system. And the PBOC plans to announce final numbers very soon.
To learn more about China’s digital currency efforts, you can read this article by Lorand Laskai. The article introduces the growing DigiChina project. It is a collaborative effort among experts on digital currency. In addition to introducing this initiative to the world, it also outlines the latest progress in China’s digital payment system. It is a fascinating read for those interested in the future of money. But what about the future of Chinese currency?
A digital yuan is more secure than any traditional currency, and could eventually challenge the U.S. dollar as the reserve currency. However, China is not out to replace the U.S. dollar as the world’s reserve currency, but to increase its use offshore and reorient the international financial system around the U.S. government. But before you get too excited, you should know that there is a risk associated with using this new digital currency.
While most jurisdictions require strict ID checks, digital currencies are less closely monitored than commercial payment apps and don’t require an internet connection. China plans to allow users to make smaller transactions using “near-field communications,” which are similar to Bluetooth and AirDrop. If the program works, it will be implemented nationwide. The Chinese government hopes to use this new system to boost the economy and drive consumption in an economy recovering from a pandemic.
China is ahead of its global peers on digital currency. It has already launched a pilot version of digital yuan, also known as e-CNY, through the WeChat mobile payment app. While not a cryptocurrency, it is a form of digital currency issued by the People’s Bank of China. It is a government-controlled digital currency that will not operate on the blockchain. It is not expected to replace the Chinese yuan anytime soon.
Beijing’s CBDC pilot has turned heads in international financial and national security circles. While the nascent cross-border trials are worth monitoring, it is unlikely to cause any serious threats to the international banking and monetary system. While China must recognize the benefits of a digital currency, the international monetary and banking system remains overwhelmingly dollarized. If China doesn’t implement CBDC in the near future, the world’s financial system may become a mess.
Besides blockchain, China’s government is embracing digital currency. Xi Jinping has called for the country to be active in setting international digital currency standards. He wants to make sure that the country’s digital payment systems won’t be as susceptible to U.S. policy pressures. Despite the ramifications of this move, the early adopters are optimistic about the future of digital currency. There is already a huge potential for innovation and development in China.