On April 25, a national blockchain platform called BSN was launched in China. Experts believe that this platform will serve as a foundation for the implementation of a national Chinese cryptocurrency, which is currently known as DC/EP. In this report, we will investigate how this new development in China might impact the crypto market and the global financial system.
The issue of blockchain development in China became a priority in 2019, when Xi Jinping, President of the PRC, expressed strong support for progress in this field. Although many people have pointed out the severe restrictions that are currently imposed on the Chinese blockchain industry (including police involvement), the development of this national cryptocurrency began many years before the cryptocurrency boom, back in 2014.
The most active phase in the growth and development of the national cryptocurrency was prompted by news about Libra, a cryptocurrency that had was previously launched by Facebook. Experts believed that the social network’s large user base could have led to the adoption of Libra as a global cryptocurrency. At the outset, the primary goal for the Chinese government was to establish the number one currency in the electronic payments market, which would have led to the reorientation of the global economy. It’s worth noting that the actions carried out by the Chinese government resulted in the development of CBDC (Central Bank Digital Currency) in other countries, such as South Korea, Switzerland, and Russia.
The first news about an app based on the digital yuan appeared online in April 2020. You can see the main features of this software in the screenshot below.
It’s worth noting that the app design is virtually identical to other Chinese payment platforms (Alipay, WeChat Pay). Sources say that the first version of the app has already been tested by a small group of users with accounts at the Agricultural Bank of China (which occupies the seventh place in a ranking of top global banks by actual net surplus). The test was conducted in only four regions in the country: Shenzhen, Shungane, Chengdu, and Suzhou.
What is currently known about the new cryptocurrency?
- The digital yuan has been termed DC/EP. The abbreviation stands for Digital Currency Electronic Payment.
- Several media sources report that the Chinese cryptocurrency will be launched in the summer of 2021, however, the Central Bank has not yet confirmed this information.
- ‘Тouch and touch’ is an innovation in the Chinese cryptocurrency market. Essentially, it means that users will be able to confirm their transfer simply by touching their electronic devices to each other.
- It will be possible to transfer funds without an Internet connection. NFC and Bluetooth technologies will come into play to resolve this issue. Judging by the available screenshots, users will be able to transfer funds using a QR code or a bank account number.
- 300 000 transactions – that’s the volume of data that will be processed each second on the new platform. That’s why the digital yuan will become the most convenient payment method.
- Sources state that the new cryptocurrency will operate based on a two-step process: at first, the Central Bank will transfer funds to a commercial bank, then circulation will be launched.
- Certain banks and companies will be able to serve as DC/EP issuers. Companies will need to make a deposit in the form of fiat money or any other assets.
- DC/EP will be characterized by a two-level architecture. In this case, licensed banks and payment organizations will be allowed to participate in the secondary emission of the digital currency.
- AliPay will serve as one of the main parties in the launch and support of this new system.
- Every company participating in the emission of DC/EP will hold a reserve account in the National Bank of China.
- Representatives from the Central Bank believe that the new digital currency will serve as a countermeasure to combat global financial destabilization.
- The core features of the platform were completed on March 24. The Bank of China is currently working on developing relevant legislation.
- In the near future, the Chinese government will establish the same degree of freedom and value for the crypto yuan as it currently does for Chinese fiat money.
- Representatives from the Central Bank have also announced that DC/EP will be used during the 2022 Olympic Games in Beijing.
A new financial system?
Certainly, DC/EP could hardly be considered to be a part of the standard decentralized cryptocurrency system. However, Chinese officials claim that it will operate similarly to AliPay and WeChat Pay.
The Chinese economy is currently in second place in the global ranking. Despite the fact that the fiat yuan is not yet ready to destabilize the dollar on the world stage, the new Chinese cryptocurrency might have a fighting chance at outpacing the US dollar in the future. This might occur as a result of changes in the concepts behind major projects such as Ton and Libra.
Today, we can certainly say that a new global financial system based on cryptocurrency systems is just around the corner.