China marches toward creation of a global digital currency

The Chairman of the China International Economic Exchange Center, Huang Qifan, revealed in October that China has been working on a central bank-issued digital currency for five to six years and he’s confident it can be introduced very soon.

The digital currency is known as the DCEP (Digital Currency Electronic Payment).

It will be rolled out first to seven institutions:

• The Industrial and Commercial Bank of China
• China Construction Bank
• The Bank of China
• The Agricultural Bank of China
• Alibaba
• Tencent, and
• Union Pay.

The People’s Bank of China (the country’s central bank) is planning to conduct the initial pilot for the DCEP for the city of Shenzhen (and possibly the city of Suzhou). The plan is for the DCEP to be generally available to the general public sometime in 2020.

The DCEP will be pegged 1:1 to the national currency – the RenMinBi (RMB). The ultimate aim is for the DCEP to eventually become a global currency like the U.S. dollar, and in fact challenge the dollar for global dominance.

But the DCEP will bypass the Western banking system, SWIFT, and be more similar to Facebook’s proposed Libra, useable on mobile platforms such as Alipay and WeChat. It will not be possible to mine or stake on the DCEP network.

Chinese tech behemoths Alibaba with Alipay and Tencent with WeChat Pay have already led the shift away from cash to mobile digital payments. They now collectively control 90 percent of the $17 trillion mobile global payments market with 1.5 billion users.

Chinese President Xi Jinping recently called on his country’s tech community to accelerate efforts in blockchain adoption. China already dominates in global blockchain patents, and according to a Chinese government study there are over 700 blockchain companies in the country.

There could be many more blockchain companies in China, according to other experts, who estimate that black-market blockchain activity is many times higher than the government’s study has indicated. Last month, for example, authorities in Shenzhen identified 39 cryptocurrency exchanges that were violating China’s cryptocurrency trading ban imposed since 2017.