China is aiming to become the first country in the world to launch its own digital currency powered by blockchain technology. Recently China’s central bank has released few details of its Digital Currency Electronic Payment (DCEP) project.
A few spectators state the DCEP might be viewed both as financial advancement and the administration's longing to expand control over the movement of Fiat. China's national cryptocurrency will be similar to Facebook's Libra – another centralized cryptocurrency which became a hot topic recently.
Like other types of cryptocurrency, the Chinese digital cash will stored in an advanced digital wallet and direct transactions will be possible.
What is somewhat different in Chinese DCEP is that China’s central bank will add monitoring features and will be able to follow where the digital money is going and even oversee trading. The goal of the digital payment system is to secure Chinese economy with most recent blockchain innovation frameworks that could prevent illicit cash movement.
Keyu Jin, a professor at the London School of Economics. She stated:
"There's an agreement around the globe among national bank governors and governments everywhere that they need to have control of cash flow and cash supply. She added: “In China it’s probably more important to control money than for any other country.”
So far we have no definitive timeline or release date for this new digital money. In September ‘19, China’s central bank supervisor Yi Gang said that there “a lot work needed to be done”.
Also the Reuters news agency reported that the People’s Bank of China has introduced more than 50 patents related to this new digital currency.
What is more, Chinese officials are openly criticizing Facebook’s Libra. They think it’s a threat to the sovereignty of every developing economy and private companies shouldn’t meddle in financial activities of this caliber.
Chinese authorities believe that digital currencies can only be issued by governments or central banks. Mu Changchun, who is the head of digital currency research center of the Chinese central bank’s has also suggested that the DCEP should be available through commercial banks, just as fiat money currently is.
With fully digital model, a tracking system would be implemented so officials could follow the digital currency’s imprint and track the money trail from one person to another.
Official goal of DCEP is to prevent illegal financial activities, it will be possible as every transaction will be stored and officials will be able to watch for illegal activity by studying patterns of payments.
In addition using AI, machine learning and big data will enable another lever of analysis and conduct identity comparisons on a large scale so Chinese overseers will be able to find every suspicious activity.
So far the plans of Chinese government received mixed reception from the Chinese citizens on social media such as Weibo.
Generally, China is viewed as country with weak privacy protections and government control and new centralized cryptocurrency is another step to control every aspect of people’s lives.
To be honest, we can say a digital currency could prevent corruption and crime. But this doesn’t change the fact that freedom of the people to build wealth might be in danger.
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