DCEP: China’s National Digital Currency Overview
What is DCEP
Digital Currency DCEP (Digital Currency Electronic Payment, DC/EP) is a national digital currency of the China built with Blockchain and Cryptographic technology. The currency is pegged 1:1 to the Chinese National Currency – the RenMinBi (RMB). The overall objective of the currency is to increase the circulation of the RMB and international reach – with eventual hopes that the RMB will the a global currency like the US Dollar. China has recently established an initiative to push forward Blockchain adoption, with the goal of beating competitors like Facebook Libra – a currency which Facebook CEO Mark Zuckerberg claims will become the next big FinTech innovation. China has made explicit that Facebook Libra poses a threat to the sovereignty of China, insisting that digital currencies should only be issued by governments and central banks.
DCEP is the only legal digital currency in China
DCEP is a currency created and sanctioned by the Chinese Government. It is not a 3rd party stable coin such as Tether’s cryptocurrency token “CNHT” which is also pegged to the RMB in a 1:1 ratio. DCEP is the only legal digital currency in China (cryptocurrencies such as Bitcoin are not legal tender in China).
Huang Qifan (Chairman of the China International Economic Exchange Center) said they have been working on DCEP for five to six years now and is fully confident it can be introduced as the country’s financial system. It’s currently being rolled out, with the People’s Bank of China (PBoC) issuing the currency.
Deployment and Distribution
DCEP will initially be distributed to all commercial banks affiliated with the Chinese Central Bank such as ICBC and Agriculture Bank of China. The rollout of DCEP will be similar to that of physical yuan. The significance of DCEP is that it’s designed as a replacement of the Reserve Money (M0) system, cutting back the cost and friction of bank transfers. Huang pointed to outdated systems like SWIFT is both slow, inefficient and costly for inter-bank payment transactions. This initial deployment will serve as an official production test for the currency system, where the network and security will be validated. In the second phase, DCEP will be distributed to large fintech companies such as Tencent and Alibaba to be used in WeChat Pay and AliPay respectively.
DCEP is a centralized, sovereign issued currency. It is not possible to mine DCEP or stake on the DCEP network.
Shenzhen will be first city to test DCEP
According to Chinese new site CaiJing – DCEP will be rolled out in Shenzhen as a test city first. Currently the planned date is before the end of 2019. This shows that China is serious about deploying DCEP and also “winning” the digital currency race.
Merchants must accept DCEP
The central government has mandated that all merchants who accepted digital payments (such as Apple Pay, AliPay and WeChat) pay must accept DCEP. This will give DCEP a large nation wide acceptance in China, with every merchant obligated to participate or face a potential loss of their business license. This will make DCEP the most accepted digital currency in the world.
Huawei Pay to Support DCEP
Owing to the widespread use of Huawei phones in China and the company’s close ties with the Chinese Government, Huawei is rumoured to be the first adoptee of DCEP. New leaked images of the Huawei Pay app shows direct connections to Chinese merchant banks and ability to withdraw DCEP.
Is DCEP backed by Gold
The simple answer is “No”. On a recent episode of Kitco News, journalist Max Kaiser claimed that China will launch a gold backed cryptocurrency, with the intention of destroying the USD as a reserve currency. He added that China has already amassed as much as 20,000 tons of gold. However this is mere speculation – China has no plans to return to the Gold Standard nor issue gold backed cryptocurrencies.
NFC Contact based payment
According to Official Sina Blockchain, DCEP will have NFC based payment options that don’t require devices to be online during the transfer. This will be poised as a direct replacement of paper money, as DCEP will be usable in areas without internet coverage. In addition, DCEP doesn’t require the mobile device to be bound to a bank account – meaning the unbanked population will also have access to the digital currency.
