A couple of weeks ago, it became known that on April 25, 2020, China will launch its national blockchain platform called BSN (Blockchain Service Network). Many believe this is the first, fundamental step before the launch of a global financial project - a government-backed cryptocurrency called DC/EP. And it seems that the country is taking this initiative more seriously than ever before.
Based on the screenshots that appeared online recently, it is clear that the crypto-yuan will be launched soon enough. More and more experts are saying that this could change the entire global financial system. So, what is known at the moment and what conclusions can be drawn from it?
In October 2019, Chairman of the People's Republic of China, Xi Jinping, said that the development of blockchain technology is one of the priorities of the state and called for accelerated growth of the industry. By that time, it was already known that China had been developing its own cryptocurrency since 2014.
News about this periodically surfaced, although most crypto enthusiasts know China more for their strict regulatory actions — significant restrictions on cryptocurrency investment, the inclusion of mining in the preliminary stop-list of industries that should be banned, closure of blockchain conferences by the police, and so on.
Much has changed since Facebook published their initial plans for Libra. The prospect of a private company with 2.3 billion users worldwide issuing its own currency made the idea much more real to governments around the world.
China took it as an incentive. First of all, to compete with the dollar in the digital payments market and, ultimately, to change the entire global financial system.
Looking at the example of China and understanding what the future may hold, many other countries have announced the development of their own CBDCs (Central Bank Digital Currencies). For example, central banks for the European Union, South Korea, Russia, Sweden and a number of other countries have announced their own developments in the field of state cryptocurrencies.
In April 2020, screenshots of the first version of the digital yuan application appeared online. According to preliminary data, the tests began among the "white list" of clients of the Agricultural Bank of China (the 7th bank in the world in terms of net profit) in four pilot regions: Shenzhen, Hong Kong, Chengdu, and Suzhou. In April, Suzhou enterprises even intend to pay 50% of transport subsidies to local workers in the new digital currency.
Several basic functions can be seen in the screenshots, and the interface is very similar to other Chinese payment platforms such as Alipay and WeChat Pay. Also, according to various statements of officials, it is already possible to understand many features and functions of the future cryptocurrency. I tried to gather all the information from different sources together.
A list of all the important facts about the digital yuan:
As can be seen from the information currently available, DC/EP is not the classic concept of a decentralized cryptocurrency like Bitcoin. The users themselves are unlikely to feel a significant difference in using the new system compared to WeChat Pay or AliPay. For the government, the blockchain data structure will ensure unprecedented traceability and control.
It is important to note the advantage China can gain by being the first to release a government backed digital currency at scale. Meanwhile, competing projects like Libra and Ton have been held back and forced to change by regulators.
Today, China is the second economy in the world and the least dependent on oil prices. While there’s no doubt that the dollar reigns supreme today, the digital yuan is China’s best chance to compete with the dollar on the global scale in the years ahead.
There is no doubt that other governments will quickly follow China’s example. Perhaps we are entering a new era — the end of physical cash and the emergence of central bank cryptocurrencies. And there is a strong possibility that this will completely change the international monetary system as we know it.
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