China has been discussing the potential of a national digital currency for half a century, and the Chinese digital yuan project, called Digital Currency Electronic Payments, or DCEP, has a long history. In 2014, the People’s Bank of China set up a research group “to study digital currencies and application scenarios”. The research team is researching digital currency and is reportedly considering issuing its own digital currency. In 2016, PBoC announced plans to develop its own digital currency and began hiring blockchain experts. That same year, China’s government included blockchain technology in its thirteenth five – year plan.

In 2017, the People’s Bank of China (PBoC) launched the Digital Currency Research Institute, which is dedicated to the development and research of digital currencies. According to the National Intellectual Property Office of China (officially known as the State Intellectual Property Office), in its first year alone, the institute filed more than 63 patent applications related to blockchain and cryptography. In 2018, a report from the China Institute of International Finance, monitored by the People’s Bank of China, indicated that the central bank would launch a campaign to regulate all types of digital currencies.

In July 2019, Wang Xin, director of the PBoC Research Office, stated that Facebook’s plan to launch Libra stablecoin (now known as Diem) influenced China’s plans to launch a digital model of the Chinese yuan. At the time, some experts speculated that the Chinese government-backed digital currency was aimed at distribution before the official launch of Libra.

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The DCEP project has made great strides over the past year; The details of the project were still limited. While the question of whether it will be the first to launch a central bank digital currency will be sufficient to achieve global reserve currency status remains open, it is clear that China is moving towards the supply chain in the digital economy.

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Just this year, China began testing the infrastructure for the digital yuan before it was officially launched, and the Chinese city of Shenzhen provided residents with the opportunity to participate in a lottery aimed at encouraging the introduction of the new digital currency by the country’s central bank. … Also this year, China completed the development of hardware wallets for the digital yuan project; The first was produced by the Xungang branch of the China Agricultural Bank in Hebei, and the second by the China Post Reserve Bank. And earlier in March, the Bank of Communications and China Construction Bank conducted digital tests of the yuan at two major stores in Shanghai.

The digital yuan versus cryptocurrencies
Experts are seriously concerned that China’s cryptocurrency is unlikely to be a cryptocurrency. As Bloomberg confirmed in 2019, “The People’s Bank of China will, of course, support the digital yuan, which does the opposite of decentralization.” The new Chinese digital currency is probably the central digital currency, not the real cryptocurrency. Shao Fujong, chairman of China UnionPay and a former PBoC employee, said in August 2019 that China’s government digital currency “will have many positive effects, including tracking cash flows in economic activity and supporting monetary policy development.”

Mu Changchun, deputy director of the payments department at the Central Bank of China, said in 2019 that the upcoming digital yuan will find a balance between facilitating anonymous payments and preventing money laundering. He repeated the statement earlier this month, saying that a completely anonymous digital currency from the central bank is “useless” as the national digital currency must meet requirements related to money laundering, terrorist financing and tax evasion. Meanwhile, the Chinese government is ready to ensure maximum privacy for users of the country’s digital currency, according to Moe’s latest statement.

The question of whether the PBoC will be the same as a blockchain-based decentralized cryptocurrency, or whether it will give Beijing more control over its economic system, is important. However, the development of the digital yuan has undoubtedly influenced the development of the digital economy in China and beyond. Cointelegraph reached out to China’s blockchain and crypto space experts for their views on the following questions: How has the development of the digital yuan affected the entire cryptocurrency and blockchain industry in China? Will China’s CBDC remain centralized or will it be gradually decentralized?

Source: CoinTelegraph