Quick Summary:
- China is experimenting with a digital version of the Digital Yuan that comes with an expiry date.
- The Digital Yuan comes with a programmable expiry date.
- This version is launched to boost consumption demand: spend it or it will vanish.
Related: JP Morgan Might Take Away the Decentralization of Ethereum
Just about a year ago China put a ban on all kinds of cryptocurrency activities including NFTs and mining activities. Though China apparently banned crypto to curtail the economic instability, the reality is crypto trades were bypassing several local restrictions and money was flowing out of its markets. Over $50 billion dollars shifted from the East Asian region to the outer world between 2019 and 2020, according to blockchain data.
Digital Yuvan DCEP: Spend it or lose it
Digital Yuan or DCEP (Digital Currency Electric Payment) is the digital version of Chinese physical currency. The Digital Yuan is built on the blockchain using cryptography however, this is a different version of cryptocurrency. Also, the digital Yuan is pegged to RMB at 1:1 and it does not involve any kind of speculation like traditional crypto.
Therefore, the key objective is to make the RMB more universally accessible and cater to the currently unbanked demographics that are part of China’s Belt &Road Initiative. This is in part with China’s overarching goal to elevate RMB to a status that would compete with the USD.
This crypto version of China will not be decentralized and will be controlled by PBoC. DCEP currency will be issued to commercial banks on demand; however, it will not be available on any crypto exchange to avoid speculation.
Features of DCEP:
- DCEP will be available only through diligent KYC (Know Your Customer) to the regulated intermediaries.
- The coin will not support P2P (Peer to Peer) transactions like other cryptocurrencies.
- Unlike crypto, DCEP will not be on a public ledger and will be controlled by centralized authorities like State Bank.
- DCEP will have a programmable expiry date to increase the money velocity and avoid money holdings by entities.
- Digital Yuan will be speculation free. Since the price is pegged to the Chinese physical currency, it will be highly stable.
- New coins will not be minted or mined through protocols but the supply will be controlled by the government.
- Bitcoin offers pseudonymous protection of user privacy which is a function lacking in the digital crypto version of the Chinese currency.
Conclusion:
Digital Yuan (DCEP) is a highly centralized coin and works like traditional currencies, except it is on the blockchain. It is reported that this coin will also be able to convert foreign currencies to DCEP with just passport information.
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author: mnmansha
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
