With the coronavirus pandemic continuing to wreak economic havoc around the world, China’s commitment to launching its much-vaunted digital yuan project, known as Digital Currency Electronic Payment, or DCEP, as soon as possible has been impressively steadfast. In this regard, it appears that the Chinese authorities are now deploying the digital currency to test it throughout the Hong Kong bay area over the next few weeks.
In addition, on August 5, it became known that a select group of China’s state-owned commercial banks had been conducting internal, industrial-scale testing of a digital coinage wallet specially designed for the digital currency. The banks are reportedly testing the wallet as a means of facilitating large-scale money transfers along with everyday payments using the digital currency issued by the central bank of China.
Traditionally, China has taken an extremely tough approach to crypto regulation. However, in developing its national digital currency, the eastern powerhouse has remained in line with its original vision, even initiating a series of pilot programmes in major cities.
The initial scope of DCEP is not yet certain
Over the past month or so, several reports have been promoting how the latest offer from the People’s Bank of China, PBoC, could potentially signal the end of the current dominance of the US dollar market, as well as disrupt the global payments market. For a start, DCEP threatens the dominance of the widely used SWIFT cross-border transaction system, especially given its inefficiency over time compared to near-instantaneous crypt transactions.
The pandemic is driving Asian countries to adopt blockchain
That said, it is still largely unclear how Blockchain technology will influence the deployment of the digital yuan. This was echoed by Yifan He, CEO of Red Date Technology – the architectural firm behind the Blockchain Service Network project in China, or BSN. Speaking to Cointelegraph, he said that as things stand, neither he nor BSN associates are clear on the role of Blockchain technology in the national project, adding:
„There are two layers: A central bank layer and a commercial bank layer. The central bank layer is definitely a centralized system. Some commercial banks might use Blockchain technology to settle and circulate the digital yuan, but it is not clear how widely the Blockchain would be adopted once DCEP is implemented.
He also felt that during its initial phases of deployment, DCEP will have a very limited scope of use, most likely at the person-to-merchant and/or person-to-person level. He went on to say that if that were the case, especially from the end-user perspective, the overall usefulness of the digital yuan would not be different from that of other available platforms such as WeChat Pay or Alipay:
„DCEP will only have a visible impact on the local economy once business-to-business and business-to-person transactions are carried out. But this implementation will involve many changes, such as taxes and bank settlements. I don’t think we’ll see that happening anytime soon.
Only niche testing is being done
As mentioned above, local Chinese media have reported that DCEP is currently being deployed to conduct large-scale trials throughout the Hong Kong bay area. In addition, a pilot programme for the digital Ethereum Code yuan will be launched in other major territories of the country.
It is believed that the scope of the digital yuan trials is being expanded to cover many of China’s most prosperous regions, including the capital Beijing and the nearby provinces of Tianjin and Hebei in the north; the Yangtze River delta in the south; and, along China’s rich southern coast, Guangdong Province and the neighbouring cities of Hong Kong and Macau.
However, on the subject, he is adamant that DCEP is only being tested in four cities in China and that these locations do not include Hong Kong and Macao: „If anyone is testing DCEP in these places, it must be from Shenzhen. Some banks are testing business processes in Hong Kong and Macao as many traders have bank accounts