Digital currency electronic payment or “DCEP” has become the latest buzzword in the blockchain community, as China announced a series of blockchain initiatives amid capitalizing on this emerging technology. The country’s push on rolling out a digital version of the yuan could bring a significant impact to the global blockchain landscape, potentially accelerating the adoption of digital currency globally. From a macro perspective, what potential benefits could digitalizing a currency bring, and what impact can it have on monetary policy, financial stability, and integrity?
Racing to Digital
While lawmakers in the US were still questioning the potential security and legal issues of Facebook’s Libra, China seems to have moved one step ahead when it comes to digitalizing its currency.
Just this week, China revealed more details about its DCEP project. Initially, the People’s Bank of China will distribute the digital currency to all commercial banks and replace the Reserve Money (MO) system, reducing interbank transfer barriers.
After the system stabilizes, the central bank will additionally commercialize the digital currency by allowing major fintech companies to use it in their mobile payment systems. Officials claim that the DCEP project was six years of hard work and research, and it will share the same nature and legal status as the traditional fiat currency.
The swift move from China seems to make the country a global leader when it comes to the application of blockchain, and it could be the biggest monetary transformation in a decade. However, China’s ambitiousness could also lead to a new global “blockchain race”.
The United States has been largely lukewarm, if not negative, over blockchain and Bitcoin. Some lawmakers on Capitol Hill have expressed their over the issuance of digital currencies, and the US Securities and Exchange Commission remains by certain crypto-related financial products. President Donald Trump has also that he’s not a fan of cryptocurrency.
However, China’s latest blockchain push could shift the tide in the US with the country taking a more proactive approach in this field, as the two superpowers compete on the technology front. A showdown in blockchain between the US and China is possible as we approach the year 2020.