DCEP – China Could Be Launching National Digital Currency Pilot Within Weeks
According to a report from an influential Chinese financial news publication, China could be kicking off their digital currency pilot before the end of 2020, after three years of working on it. The Chinese Central bank along with the People’s Bank of China, the four major state-owned commercial banks of Industry, Agriculture, China, and Construction are expected to be launching the pilots within weeks in Shenzhen and Suzhou – as well as some other cities.
“Sources close to the pilot project team said that the pilot (Shenzhen digital currency pilot) plan is divided into two phases. At the end of this year is phase one and the pilot will be a small-scale scenario – however – in the second phase next year it will be promoted in Shenzhen on a large scale.”
Mu Changchun, director of the Digital Currency Research Institute of the Central Bank, pointed out:
“In order to protect our currency sovereignty and fiat currency status, we need to plan ahead.”
“The sovereign credit of a nation is what backs up currencies of individual countries and central banks. No other organization has that calling. The fundamental credit of the United States is far in excess of anything that Facebook can imagine,” said Greenspan when he was taking questions from the audience of the Caijing Magazine Annual Conference 2020.
According to an article by Mike Orcutt in MIT Technology Review, the first phase could start before 2020 and this supports the rumours that China is on the verge of becoming the first major economy to issue sovereign digital money.
The Caijing report seems to confirm several details about the forthcoming currency system, called Digital Currency Electronic Payment (DCEP), that have appeared in news reports during the past several months. For instance, it confirms that the PBOC will partner with commercial banks to issue the currency and that during the initial phase the banks will compete on how best to implement it. It says tests will likely include seven state-owned firms: the four largest commercial banks and three big telecom companies. According to the news report, the tests will involve real-world service scenarios in the areas of transportation, education, and medical treatment.
Goodbye, cash … The report also reiterates that the PBOC means for DCEP to be a direct replacement for physical cash.
In fact, Chinese banknotes and coins are already quickly being replaced by mobile payments, particularly via Alipay and WeChat Pay, the QR-code-based apps that have become ubiquitous in the span of just a few years. It’s been estimated that mobile payments made up more than 80% of all payments in China in 2018, up from less than 20% in 2013.
Along with the eventual elimination of paper and coins, he also noted there could be serious privacy issues:
“… goodbye, privacy? Mu Changchun, the head of the PBOC’s digital currency research institute, has said the DCEP will be compatible with Alipay and WeChat Pay. He also said it can be used without an internet connection. Some of the biggest questions pertain to privacy and anonymity, and how much access the government will have to transaction information. The new report from Caijing repeats something Mu has also said before: that the DCEP will offer users at least some degree of “anonymity.” It does not, however, explain how that might work.”
“Obviously, the pilot is only the first step. There is still a lot of work to be done in the future, and it is not without challenges. A senior technical solution source told influential Chinese financial news publication that the central bank has done a lot of preparations, including the popularization of currency and products, but from a technical perspective, there is still a long way to go.”
“With the acceleration of the central bank’s research and development of digital currency and pilot projects, it is foreseeable that the financial industry related to the printing, issuing, returning, and storage of banknotes will face changes.”
Founder and publisher of industry publication Blockchain News (EST 2015), a partner at ICO services collective Token.Agency ($750m+ and 90+ ICOs and STOs), director of education company Blockchain Partners (Oracle Partner) – Vancouver native Richard Kastelein is an award-winning publisher, innovation executive and entrepreneur. He sits on the advisory boards of some two dozen Blockchain startups and has written over 1500 articles on Blockchain technology and startups at Blockchain News and has also published pioneering articles on ICOs in Harvard Business Review and Venturebeat.Irish Tech News put him in the top 10 Token Architects in Europe.
Kastelein has an Ad Honorem – Honorary Ph.D. and is Chair Professor of Blockchain at China’s first Blockchain University in Nanchang at the Jiangxi Ahead Institute of Software and Technology. In 2018 he was invited to and attended University of Oxford’s Saïd Business School for Business Automation 4.0 programme. Over a half a decade experience judging and rewarding some 1000+ innovation projects as an EU expert for the European Commission’s SME Instrument programme as a startup assessor and as a startup judge for the UK government’s Innovate UK division.
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He is a Canadian (Dutch/Irish/English/Métis) whose writing career has ranged from the Canadian Native Press (Arctic) to the Caribbean & Europe. He’s written occasionally for Harvard Business Review, Wired, Venturebeat, The Guardian and Virgin.com, and his work and ideas have been translated into Dutch, Greek, Polish, German and French. A journalist by trade, an entrepreneur and adventurer at heart, Kastelein’s professional career has ranged from political publishing to TV technology, boatbuilding to judging startups, skippering yachts to marketing and more as he’s travelled for nearly 30 years as a Canadian expatriate living around the world. In his 20s, he sailed around the world on small yachts and wrote a series of travel articles called, ‘The Hitchhiker’s Guide to the Seas’ travelling by hitching rides on yachts (1989) in major travel and yachting publications. He currently lives in Groningen, Netherlands where he’s raising three teenage daughters with his wife and sailing partner, Wieke Beenen.