China Working on a Digital Currency Electronic Payment, DCEP

Zhou Xiaochuan, the Central Bank of China governor, said working on the currency, DCEP [digital currency & electronic payments] is in due process. The objective of DCEP is to pursue convenience, security, and speed in payments. Nevertheless, Xiaochuan said that it might not necessarily be a digital currency.

The digital currency will be built on distributed ledger technology, blockchain technology or created on the current electronic technology. According to Xiaochuan, the digital currency is technically not inevitable, hence the need to put into consideration the overall financial stability, protection of consumers and prevention of risks.

In his last public remarks, the departing PBoC governor said it is recognized that the People’s Bank started organizing seminars on cryptocurrencies over three years ago. Later, the Central Bank’s Digital Currency Research Institute was built.

The most recent activity was to plan for distributed R&D with the aim to carry out different programs, depending on markets and ensure working together for the development of digital currency. The clear objective is to research the application of digital currency enabling money to accomplish a specific technical solution, convenience, speed, low price of the retail payment system, protection of privacy and security.

With technological development, the growth of digital currency is not evitable. Gradually, in the future, the scale of banknotes may shrink for a while. In the year 2017, the People’s Bank of China conducted research projects on electronic payments and digital currency, which were endorsed by the State Council.

With the research and development plan, the cryptocurrency will enter the testing phase after a specific degree. For long, the central bank has paid attention to monetary technology which is the overall attitude towards technology and science. There is a great concern regarding the use of distributed ledger technology and blockchain. At the same time, development and research ought to be more prudent.

The argument is; it’s good to research new things, but apart from market power, it is recommended to consider the overall situation. From the opinion of the central bank, inadvertent items are stopped first, before promising items are tested and approved for further promotion.

Thus, the central bank approach was to end ICOs by the end of August 2017. Later, it did not offer support to renminbi and bitcoin transactions, although there was a Bitcoin-like virtual currency used for payment. Nowadays, the banking system does not provide or accept related services.

Regarding future supervision, it depends on the level of technology and endurance, since it is dynamic. Since 2016, PBoC highlighted that cryptocurrencies are the future, whereas blockchain technology is ‘hot’ in the country.

Recently, PBoC gave full authority ordering WeChat to reduce the official accounts of previous world crypto exchanges based in China, such as Huobi and OkCoin. All ICOs and all cryptos such as bitcoin have been efficiently banned despite Chinese citizens utilizing them which have made the ban less effective.

Applying to those draconian mechanisms indirectly promotes blockchain. The hostility and controlling behavior of the central government, has led to the open antagonism towards this space. With the government now trying to encourage the application of this technology, the technology may continue ragging behind until they open the free market.