China is the first country in the world which plans on launching its digital currency, Digital Currency Electronic Payment, through its central bank. Mu Changchun, the head of the Chinese central bank’s digital currency research center, supported the idea that the virtual currency should be introduced and made available through commercial banks, just like good old cash. Currently, DCEP is in advanced trials stage in four Tier 1 and Tier 2 cities: Shenzhen, Xiong’an, Chengdu and Suzhou. After the pilot trial, it would be introduced in more banks for testing, in order to improve technology, security and stability of the payment tool.
Digital Currency Research Institute of the People’s Bank of China (PBC) reported that the DCEP project, which was started about five years ago, is coming off steadily. Besides DCEP, the country is promoting research and development of blockchain initiatives. The key goal behind this move is believed to undermine the significance of US dollar in global trading and to establish Chinese technology giants (like Tencent, Huawei, Baidu and Ant Financial) as the world leaders of digital payment infrastructure.
Besides, it will also help China gain advantage over US in the ongoing trade war. Last year, Chinese president Xi Jinping in his speech urged the country’s leading technology companies invest in developing blockchain technology as it was country’s priority and advocated to ‘seize the opportunity’. Due to increasing US tariffs China has lost several trading partners and advanced blockchain technology would help it abundantly in gaining trading opportunity with the emerging technology markets.
Chen Bo, director of the Finance Research Centre at the Institute of Finance and Economics at the Central University of Finance and Economics told the daily, “There will be two types of players in future trials, the banks and telecom companies. At present, the central bank is testing the software of DCEP, and whether it will be combined with 5G and sim cards in the future needs to be discussed.”
Some analysts viewed China’s ongoing financial innovations and development of DCEP as the country’s keenness to control over the movement of money and supervise trading.