Different Angles to China’s Digital Currency Plan
Chandler Guo may have been at the forefront of contributing to Bitcoin’s success including investigating in its mining operations, he now sees China’s Digital Currency/Electronic Payment (DC/EP) as a potential payment system that could become the dominant global currency.
“One day everyone in the world will be using DCEP,” the Chinese investor recently said to the UK’s BBC hinting that the DC/EP’s success will be powered by the people. “DCEP will be successful because there are a lot of Chinese people living outside of China – there are 39 million Chinese living outside of the country,” Guo adds. “If they have a connection with China they will use the DCEP. They can make DCEP become an international currency.”
Initially fraught with suspicion as it was dubbed a tool for monetary control and to monitor citizens, Guo’s suggestion that the people – those who would be tracked if the surveillance claim of the digital currency stands – could be the ones to make the DC/EP initiative succeed is a new angle.
China launched the DC/EP as a CBDC initiative, or digital yuan, to gain a head start as the first major economy to enter the government-backed digital currency space and it appears to be moving far more rapidly than the other economic superpowers moves towards digitisation. The rapid growth rate poses a serious threat to both the dollar and the euro, the two leading currencies in the world, according to a non-profit organisation in Germany, DGen, thus leading to an ideological perspective with its attendant likely impact on the global economy.
“A digital Yuan, formally known as the Digital Currency/Electronic Payment (DC/EP), is increasingly part of the plan to dismantle the Dollar,” DGen states in its latest CBDCs:Geopolitical Ramifications of a Major Digital Currency report. “In fact, the plan for the DC/EP includes the Blockchain Services Network (BSN), which will boost blockchain adoption in China, and is specifically designed with digital assets in mind, paving the way to a more integrated payments method. The battle for economic prominence continues to grow and has turned into an increasingly ugly political and economic battle.”
While Guo’s view may be somewhat new, and the digital yuan probably rise above existing top global currencies probable, some are still cautious of what the initiative could achieve and need to be convinced otherwise. They include the likes of Eswar Prasad, a professor of economics at the School of Applied Economics and Management at Cornell University, who believes that China’s Cross-Border Interbank Payment System, introduced in 2015, is a more important innovation than DC/EP as it makes it easier to use the yuan for international transactions.
Though the DCEP could eventually be linked up to the cross-border payments system, further digitizing international payments, the DCEP by itself will make little difference to whether foreign investors regard the yuan as a reserve currency, Prasad writes in an opinion piece for Caixin Global.
Meanwhile, China’s top broadcaster, CCTV, and state-owned news agency, Xinhua have both published content this week to highlight crypto assets’ 70% growth this year so far. A coordinated approach is new as so is the likely that’s to emerge in the digital currency space in time.