How to make sense of China’s new national digital currency DCEP
Once again the spotlight is on China, the COVID-19 crisis is still highly present but The People’s Bank of China and its major launch of the application ‘Digital Yuan’ are adding to the headlines.
Why did china create their own digital currency?
Chinas new cryptocurrency will allow them to record every single transaction with high precision in real-time.
DCEP is set up to reduce the cost involved in maintaining and recycling banknotes and coins.
Decrease rates of fraud and counterfeiting, which would be of service to the government attempt to reduce corruption.
And the development would give China’s government more information about its citizens’ spending habits!
Gary Liu, an economist in Shanghai said:
“This is highly controlled, manageable, and decided by the central government,”
What does DCEP stand for?
China’s central bank – the People’s Bank of China, has developed a new national cryptocurrency called DCEP (Digital Currency Electronic Payment).
- have the same value as China’s paper currency the renminbi (also called the yuan).
- still have national credits,
- and also have the corresponding functions on the renminbi.
Almost everything is digital today and the function of mobile payment is considered irreversible. The difference between mobile payment and China’s new digital currency DCEP is that their digital currency doesn’t have to be connected to any bank account when you are paying. There will be no mediator and the transaction is considered smoother.
History of DCEP-development:
2014 – The People’s Bank of China started a cryptocurrency research team.
2016 – governor ‘Zhou Xiaochuan’ contemplated the ide of a digital coin in the future!
2017 – the after-effects of Bitcoin’s halving-event made China decide to shut down cryptocurrency exchanges in China and instead they turned to fund-raising through virtual coins.
2019 – Facebook announces its new currency Libra and that made China call for accelerated growth of the industry.
2020 – April 25 the People’s Bank of China launched its initial trial in four cities:
About the wallet Digital Yaun
The Application can now be downloaded in those four cities. Since it is a closed-circuit test it will not affect the involving businesses, Chinese financial markets, or fiat currency outside the test area.
Digital Yuan does currently include the following futures:
- ability to send money
- make retail payments by scanning a barcode
- request a payment
- touch phones for p2p payments.
- Manage funds
- Link the wallet to other accounts
- Review all transactions
To round it up:
China has built its own national digital currency called DCEP, it is a digital currency and it runs on a centralized private network where the Central Bank of China has complete access and control of the currency.
In April the bank launched its new application Digital Yuan in four cities for a test-round before the actual launch.
Accordingly to the Chinese government, the rollout of the digital currency will happen gradually and there are no further details of an official launch. But there are plans to run another internal test during the Winter Olympic Games hosted in Beijing in 2022.
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