DC/EP as Gas on BSN, Digital Currencies Bode Well for Inflation
China’s proposed DC/EP is on the path of being used to tax transactions on the Blockchain Service Network (BSN), the CEO of Tezos (Apac) has suggested during an edition of the newly-introduced BSN webinar series Long Story Short.
David Shin said the DC/EP running like the gas on the BSN, the platform launched last year as a cross-framework global infrastructure for the deployment and operation of all types of blockchain dApps, has always been a part of the strategy since it’s obvious that the government has to generate revenue somewhere.
“I kind of see this going down the path of most governments, including China, where it gives them the opportunity to tax transactions and have it in a way that you can’t swim out of it,” Shin said during the online event meant to discuss several central bank digital currency (CBDC)-related discussions including why governments are keen on issuing it, the problem it solves, its global development and implementation and the challenges to implement it. He adds:
“You know, if you have a peer-to-peer transaction that happens over a network that is running DC/EP as the gas, you’re going to have to pay that gas to the government. They could call it a digital transaction gas. It may seem like a small micro-fraction that comes off but when you think about billions and trillions of transactions per day per week, that could be a lot of revenue for governments which is a very strong focus given the amount of fiscal spending they’ve been doing because of COVID.”
The event comes timely as China continues to iron out the implementation of its CBDC technology with the latest pilot testing in Beijing where a lottery will give out free online wallets containing 200 digital yuan ($31.34) to winners.
The notice states that the red envelopes will be distributed to 200,000 lottery winners – chosen from those who must have registered before June 6 – who will use their prizes at designated merchants around the city.
e-CNY for de-dollarization, inflation
“I see the new digital currency being a good way of dealing with inflation as well which is something that is very important globally,” Shin said, citing the US having printed about $5 tln in a calendar year as a stimulus package. “That bodes well for scarcity and the digital economy. He also thinks that the plan to use the digital renminbi on an international level may have been in the picture all along.
“Anyone who follows the financial market and financial news, we all know that there are many countries including China who are very much looking to de-dollarize,” he said, noting that there is a high degree of interest initially in creating the CBDC as a part of the de-dollarization strategy. “That process of de-dollarization has not been easy in the past. It was never really going to work to try and make the current renminbi a competitor to the US dollar on the global stage.”
However, with the European Union not trying to challenge the US dollar though they have their own conflict of interest with counterparties like Iran whom they were not able to trade with because of US embargoes, the digital yuan presents an opportunity to get the rest of the world to use China’s currency. A success with the DC/EP could help the de-dollarization process, a goal China had tried to achieve through the One Belt One Road strategy and its member countries.