DCEP leaves what?
DCEP (Digital Currency Electronic Payment, DC / EP) is the national digital currency of China. They will be built using Blockchain technology and cryptography.
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The goal of this currency is to increase the circulation of the renminbi and expand international reach. And the final destination of the project is to help the yuan become a global currency like the US dollar.
China recently built a roadmap to promote the adoption of blockchain technology, with the aim of beating out competitors like Facebook's Libra - a currency that Facebook CEO Mark Zuckerberg vowed to be. the next FinTech revolution.
In the past, the Chinese authorities have clearly stated that Libra will pose a threat to the sovereignty (currency) of this country, emphasizing that digital currencies should only be issued by governments. and central bank.
DCEP will not be listed on crypto exchanges and will not be used for value speculation.
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DCEP is not a 3rd party stablecoin (such as the "CNHT" Tether pegged to the RMB at a 1: 1 ratio), but rather a currency created by the Chinese government and a type of currency. the only legal cryptocurrency in this country. (Cryptocurrencies like Bitcoin are not recognized as legal in a billion-dollar country.)
Huang Qifan (President of China International Economic Trading Center) said that they have been working on DCEP for 5 to 6 years now and are fully confident that they can be introduced as the country's financial system. .
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DCEP can collect real-time data related to "money printing", bookkeeping, etc., providing useful references for money provision and monetary policy implementation.
Why did China decide to choose to develop a digital currency?
The meaning of DCEP is that they are designed to replace the cost-cutting Reserve Money system in bank transfers. In addition, the central digital currency will help reduce the risk compared to paper money transactions such as counterfeit money, money laundering and sponsoring illegal acts.
Some believe that financial and currency oversight will be improved, as regulators can better monitor digital currency transactions. In addition, DCEP can also reduce the costs associated with the maintenance and recycling of banknotes and coins.
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This is because before the Renminbi Inter-Bank Interbank Payment System (CIPS) came into operation in early October 10, cross-border payments and clearing were in RMB. This is done through CHIPS (Clearing House's Interbank Payment System) or SWIFT (Global Interbank Financial Telecommunication Association).
However, some argue that both the CHIPS and SWIFT systems have major limitations (for China).
First, CHIPS is a US company. Second, SWIFT has an important position in the international banking system, so it is necessary to use SWIFT to transfer between countries and that is considered a cause for Chinese concern. For whoever controls SWIFT's data center will have access to almost any information about international money transfer operations.
Many in China believe that the people watching their activities are Americans, as SWIFT claims to be a neutral international organization, 12 out of 25 directors are from the United States and allied countries. . In addition, transaction data here was found to have been provided to the US government.
Therefore, many believe that China is being restrained by the US through the SWIFT system. Therefore, China requires its own worldwide banking system - that is, DCEP.
According to Chinese media, DCEP is considered to be the "3rd wave" aimed at the United States.
The history and development of DCEP
The DCEP development project started in 2014 with the establishment of a research institute dedicated to digital currencies and looks at how to improve the Chinese Yuan system using blockchain technology.
However, between 2014 and 2018, development was quite slow, possibly due to the decentralized nature of Bitcoin or blockchain is incompatible with the nature of the renminbi - a legitimate national currency.
However, things quickly prospered in late 2019. It can be said that the direct impact is due to Facebook preparing to launch Libra. Especially when members of the Libra Association and the currencies that Libra will support, there is no shadow of the world's most populous country.
Consequently, in the heat of competition, China's central bank feels enormous pressure to urgently speed up in the global competition towards a digital currency.
The former PBoC National Council Vice-Chairman of the Social Security Fund announced on June 22, 6 that China has completed the ancillary infrastructure for DCEP. Along with that, Chinese cities, foreign companies, and the 2020 Winter Olympics hosted by China will participate in the DCEP pilot test.
DCEP is not for speculation
China has clearly stated that its national digital currency is not for speculation. The director of the People's Bank of China Digital Monetary Institute Mu Changchun said they are "a digital form of the yuan", a centralized, sovereign and will there is no speculative behavior on their value.
This has caused disappointment for the Internet community in China, some netizens commented: "So it will not be interesting" on the Sina website.
This currency is not for speculation. They are different from Bitcoin or from stablecoin - Mu Changchun
And no one can exploit DCEP or staking on the DCEP network.
Deploy and distribute
According to Caijing magazine, the DCEP pilot organizations will be four major banks: China Construction Bank, Agricultural Bank of China, Bank of China and Industrial and Commercial Bank of China.
This initial implementation will be a distributed test as with a monetary system, confirming the security of the system. In phase two, DCEP will be distributed to major fintech companies like Tencent and Alibaba for use in WeChat Pay and AliPay.
DCEP will operate on a two-tier system
DCEP issuance and distribution will be based on a two-tier system.
The first layer will be transactions between the PBoC (the state bank) and the intermediary. These intermediaries will be financial institutions (eg the four major banks outlined above) and non-financial institutions such as Alibaba, Tencent and UnionPay. Here, the PBoC will provide DCEP to the intermediaries.
The second floor will be between the middlemen and the retail market participants such as companies and individuals. At this level, the middleman that has received DCEP distributes them to the retail participants so that they can be circulated in the marketplace, for example through shop buyers, etc.
However, the main difference in issuing and distributing DCEP compared to traditional cash is that DCEP will be transferred via e-wallet, instead of a bank account.
China has completed the ancillary infrastructure for DCEP
China has already completed the backend infrastructure for DCEP, as well as setting the parameters, researching and developing their functions, testing general debugging, ... although continuous testing is still required.
According to netizens who obtained screenshots from the closed beta version, DCEP wallet will support a number of key functions including: digital asset transactions, wallet management, the ability to look up in-process transactions. past. Other functions include QR code payment, money transfer and mobile payment.
Other images circulated online appear to be of the Bank of China DCEP wallet. As you can see, the wallet will allow sending - receiving and converting currencies, ... with a simple interface that displays the user's transaction history.
How will DCEP be tested?
On August 17, 8, CCTV 2020 - a Chinese national television station - confirmed that DCEP will undergo its first pilot test called the "2 + 4 method". That means there will be closed pilot trials in Shenzhen, Chengdu, Suzhou, Xi'an first, and several locations where the 1 Winter Olympics will be held.
The CCTV report also confirmed that some government officials in Suzhou received a portion of their salaries in DCEP.
Analysts believe that before the pilot program can be expanded on a large scale, money regulators will need to address key issues such as technical issues and market promotion to get people used to it. using more cryptocurrencies.
Eventually, the trials will be extended to 28 provinces; includes Beijing, Shanghai, Guangzhou, and the Hong Kong-Macau Hypermarket Area. The expansion means the scope of the pilot experiment could include a potential user base of around 400 million people (~ 29% of China's population).
Foreign companies like McDonalds and Starbucks will also experiment with DCEP
Along with a number of local hotels, auto supermarkets, automatic parcel stations, bakeries, bookstores and gyms, ... foreign companies such as Starbucks, McDonald's and Subway were also reported to participate. DCEP testing.
The announcement was made on April 22, 4 at an event organized by the National Development and Reform Commission. A total of 2020 companies will participate in the trial.
China's CCTV has confirmed that in Xi'an, McDonalds and 19 other companies have begun testing DCEP.
The agent must accept DCEP
The government has required all agents that accept digital payments (such as Apple Pay, AliPay and WeChat) to do so. right accept DCEP.
This will give DCEP wide acceptance across the country, with any agent obligated to participate, and a loss of their business license may result if they refuse. With regulations like these, DCEP will become the most accepted digital currency in the world.
Huawei Pay supports DCEP
Because Huawei phones are widely used in China and the company's close relationship with the government, there are rumors that Huawei will be the first to adopt DCEP.
The latest leaked image of the Huawei Pay app shows direct connections to Chinese commercial banks and the possibility of withdrawing DCEP. Following in the footsteps of Huawei, rival company Tencent has also announced it will support DCEP on the WeChat pay platform.
DCEP 10 million yuan will be donated to the people of Shenzhen
Shenzhen will give locals 10 million yuan (~ $ 1.47 million) in DCEP through a lottery on October 11, 10. Shenzhen's Luo District will distribute a total of 2020 digital “red envelopes”, each containing 50.000 yuan (~ $ 200) to citizens who have registered for the lottery on iShenzhen - a service app public blockchain-based public operated by the Shenzhen Government.
Winners will be announced on October 11, 10 and can receive DCEP "lucky money" via e-wallet on Digital Renminbi Application. Here are pictures of the red packets:
Residents can use DCEP at 3.389 designated stores in La Ho from October 12 to 18, 10.
China Construction Bank launches DCEP wallet
On August 29, 8, China Construction Bank (CCB) launched a DCEP wallet. Bank customers will see the DCEP wallet feature available in their mobile application. Users can even navigate to the digital yuan wallet and activate it through registration of a mobile phone number.
The news has spread strongly in the Chinese cryptocurrency community and on social networks. Some users are even able to do small transactions by linking their CCB accounts to a DCEP wallet.
According to the images below, it appears that upon wallet activation, users will be assigned a specific wallet ID to transact between their wallet and their bank account (left picture). The main interface (middle image) also displays some features such as deposit / withdrawal, view detailed information of the transaction, connect your bank account with DCEP wallet, "give" lucky money, return credit card. use, upgrade and cancel DCEP wallet.
The right image also shows the ability to pay / receive / transfer money with a simple click or the ability to "scan" the wallet with other users. The "red envelopes" function is also very interesting, as it occupies a page of WeChat's popular "red envelopes" feature, allowing people to donate a sum of money to others. Only the recipient will see the donation when they "open" the bag.
This feature is extremely popular during the Lunar New Year, where managers or bosses send "virtual red packets" across their company's WeChat chat group for employees to eagerly collect.
Finally, a user can send / receive the digital currency to someone else by entering his unique wallet ID or the phone number associated with the bank account.
However, CCB disabled the DCEP wallet feature from public access after causing great attention. Users searching for this wallet will now only receive an error message, stating that this functionality is not officially available to the public yet.
Tencent becomes a major partner of DCEP
Tencent's Meituan Dianping has been in talks with the PBoC team about using DCEP in the real world. Meituan Dianping boasts billions of dollars in daily transactions on their mobile app platform, offering services like food delivery (similar to UberEats), and breakfast reservations (similar to AirBnb) ), ride-hailing, bike-sharing, grocery shopping ...
Basically for those in China, all of your daily necessities can be met on the Meituan ecosystem.
The PBoC's team is also in talks with another Tencent-backed company Bilibili Inc., which provides a video streaming service. So while the specific details of the partnership have yet to be revealed, it is likely that such collaborations will be a huge boost to the mass use of DCEP in China.
Difference between DCEP, Libra, Bitcoin and Cash
Below is a table comparing the different features between DCEP, Libra, Bitcoin and cash:
Payment based on NFC
According to Official Sina Blockchain, DCEP will have NFC-based payment options that do not require the device to be connected online during the transfer process. This will be considered a direct replacement for banknotes, as DCEP will be usable in areas without internet.
Additionally, DCEP does not require a mobile device to be linked to a bank account - meaning anyone who doesn't use a bank will also have access to the digital currency.
With DCEP's payment feature, people can simply transfer money by touching two phones together without using the Internet. So DCEP is not quite the same as blockchain, it's a new variant.
Authorization to apply Blockchain
China has built up a plan to promote nationwide adoption of Blockchain. when President Xi Jinping demands to speed up the country's blockchain technology development ahead of the Politburo.
This speech was also reiterated by the head of the People's Bank of China, Li Wei. In April 4, China launched the Blockchain Services Network to unify all Blockchain related projects nationwide.
In addition, this billion-population country has adopted the motto "Blockchain, not electronic money", under which the benefits of Blockchain are emphasized. Blockchain-derived cryptocurrencies, on the other hand, are blocked because cryptocurrency exchanges and ICOs are banned here.
China is expected to spend $ 1.42 billion on blockchain development plans in 2020.
DCEP is a centralized currency
DCEP is a digital currency operated on a centralized network, the Central Bank of China has full access to and control over them. This is a huge contrast to Bitcoin, which has an open decentralized network where there aren't any leaders.
In the case of DCEP, the Bank of China has the ability to create or destroy cryptocurrency.
Which platforms support DCEP?
Just hours after DCEP was announced, various Chinese exchanges (potentially a scam) listed IOUs or DCEP clones.
It is important to know that DCEP is currently only distributed to banks that work with the PBoC and will not be available to the public. We strongly recommend NOT to trade DCEP until it is officially released as there is no guarantee that exchanges have access to the digital currency.
How to buy DCEP?
Currently DCEP is only available to banks that are working with the People's Bank of China. It is known that DCEP will open to the public in 2020, but there are no crypto exchanges trading DCEP yet.
Is DCEP a challenge to the US monetary system?
A lot of people believe that this is true, both from a Chinese and a US perspective. According to World Bank statistics, 1.7 billion adults around the world use cash because they do not have a bank account.
However, two thirds of this population owns a cell phone, which can be used to make currency transactions. This is what's happening in China, where mobile payments like Alipay or WeChat Pay attract more than 2 billion customers nationwide.
Currently, the two online payment companies above process more monthly payments than Paypal did in 2017 ($ 451 billion). In China, it is very common for retailers to accept payments via Alipay or WeChat.
With mobile wallet payment infrastructure, their partnership with the PBoC could be the answer for DCEP overseas distribution. This will be in line with China's "Belt and Road Initiative".
(The Belt and Road are an ambition of the Chinese government. The aim is to build a new trade route connecting Asia, Europe and Africa.)
The idea is that with DCEP being used by mobile wallets, residents living along the Belt and Road can be connected, completely bypassing existing financial infrastructure and creating opportunities for people who don't use bank services for online shopping or accumulate their savings.
In the United States, the government does not see a demand for digital currencies. In a letter from Federal Reserve Chairman Jerome Powell, he said that many of the challenges a digital currency intends to tackle need not apply to the United States.
In his view, the US payments landscape is already highly competitive and innovative, with a wide variety of consumer digital payment options. Powell also echoed the comments of US lawmakers against Libra, saying that digital payments wouldn't be attractive to the United States.
While the House Financial Services Committee sees Libra as potentially causing national security concerns, observers say the challenge coming from China is not being taken seriously.
Because China is worried that Libra will consolidate its US dollar dominance, it is working to accelerate the launch of DCEP. And it is likely that the threats from China will far outstrip those from Libra.
On the larger side, some argue that DCEP could be used as a weapon against the United States in an economic war.
This is because when DCEP is adopted on the entire Belt and Road, China will have the power to oversee and control the entire economic activities of half of the world's population. DCEP will allow China to track people's spending and transactions, and be able to seize or freeze customers' digital assets in their mobile wallets.
The Meaning of DCEP for Bitcoin and Cryptocurrencies
First, it should be noted that DCEP and Bitcoin / cryptocurrencies are very different. The main difference is that DCEP doesn't necessarily use blockchain technology and it is a centralized currency, operating under the control of an agency.
However, the large-scale promotion of DCEP on national television in August 8 further increased the certainty that Chinese citizens would have a digital version of the Yuan. The gradual implementation of DCEP will also help people of all walks of life get used to the actual use of digital currencies.
As a result, many are excitedly speculating about the connectivity between DCEP and existing blockchain projects - with a number of projects claiming they will be the first to launch on DCEP.
However, it should be noted that we don't know the full specifications of DCEP, so we are not clear about how the connections between blockchain and DCEP will work (if any).
Additionally, Chinese government agencies are currently "hostile" to cryptocurrencies, this is mainly due to a number of giant scam projects that have rocked the crypto industry - such as Plus. Token.
As a result, the Chinese government froze several bank accounts found involved in cryptocurrency transfers and banned all ICOs, some major cryptocurrency exchanges like Binance and OKEx, and some OTC exchange.
However, in a confusing twist, Chinese official media channels like Xinhua and CCTV made headlines that crypto assets were the best-performing asset to date.
Primitive Ventures' founding partner Dovey Wan has found it difficult to explain the real intentions behind the media's push. But so far the Chinese crypto community sees this as a signal, that crypto has taken a new step forward.
Meanwhile, on Twitter, people see this as a bullish signal. Currently, there aren't any other moves or news in China about DCEP or cryptocurrencies. What we can do for now is wait and see what China's next move will be.
Hmm this is an interesting propaganda vibe from CCP's official media outlets as “参考 消息”, Xinhua and CCTV2
the headline “cryptoasset is the best performing asset YTD” was featured on all avenues, news paper, online media and TV
It's rare for such a coordinated effort pic.twitter.com/2g6VDsV5SE
- Dovey 以德服人 Wan ?? (@DoveyWan) September 25, 2020
Will DeFi motivate governments to adopt CBDCs?
Decentralized Finance (DeFi) could be considered the star of the year 2020 for helping to revive the crypto market. But what is DeFi? In short, DeFi is the party that tries to bring traditional banking into developing industries, but with a twist: it will be open source, decentralized, cheap and will eliminate middlemen. .
So what can central banks and governments do to maintain their dominance while still benefiting from the technology that DeFi brings? The only option is to create a CBDC.
In an article by Forbes, the author says that the CBDC will be a positive move for governments as it tokenizes the currency, while also allowing users to enjoy advantages like cheaper, fast transaction fees. than.
The article also mentions the coverage of DCEP and discusses China's progress in testing DCEP, contrasting with the progress in introducing CBDC in the US.
However, the article notes that governments and institutions will need to quickly catch up as new DeFi solutions in payments, mortgages, insurance, etc. are being created weekly and growing. strong.
When will DCEP officially launch?
There is still no specific date on the official launch date of DCEP. However, for now, some experts have revealed to China Daily - a news agency in China - that before DCEP officially launches, it may still be necessary to adjust the original plans because the situation is "complicated. " much more.
Experts also revealed that it is unclear if DCEP could launch in the second half of 2020, although their development plans have certainly been pushed up by the PBoC.
Is DCEP backed by Gold?
The answer is "No". In a recent week of Kitco News, journalist Max Kaiser announced that China will launch a gold-backed cryptocurrency, with the intention of destroying its US dollar reserve assets. . He added that China has stockpiled up to 20.000 tons of gold.
However, this is only speculation as China has no plans to issue a gold-backed cryptocurrency.
Is DCEP compatible with other cryptocurrencies?
There are plans to build gateways that allow DCEP to be transferred to other cryptocurrencies. Projects like Algorand has stated that they want to support DCEP and build viable bridges to swap the currency.
However, because DCEP's technical details have not been fully disclosed, such “bridges” have not yet been built.
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