BEIJING – After numerous postponements, China seems ready to use its own cryptocurrency, the first of its kind to be openly endorsed by a State and equivalent to legal tender .
Cryptocurrencies in general are digital forms of money protected by some form of encryption . The best known ones that have burst onto the scene in recent years are those that are based on a system of controls called blockchain . Among them stands out bitcoin whose main characteristic is its distributed control and the (supposed) impossibility of one or few people controlling it.
Despite not having the endorsement of a central bank or any official authority, some cryptocurrencies achieved what is essential to consider themselves money: to be accepted as carriers of value. Their dissemination and speculation around them posed a problem for governments because the movements become a black box inaccessible to any control. That is why in some countries, notably China, they recently banned its use and the processing necessary for its operation: about 70 percent of global bitcoin mining was taking place in China .
Large corporations, eager to expand their businesses to other profitable sectors, also set their sights on this technology. Facebook in particular, proposed its own cryptocurrency, Libra , to conduct “frictionless” transactions . The banks appeared to have learned the lesson from film, hotel, media and other victims of digitization, and they rushed out to the crossing demanding more controls from the government. The project could not give clear answers and was left in limbo .
Despite the twists and turns the interest in virtual money continues. China, after banning bitcoin, took the lead in the first implementation of a blockchain-based sovereign cryptocurrency. He designed the Digital Currency / Electronic Payments or DCEP for its acronym in English.
It is speculated that the sudden rush to implement after years of feints has to do with the threat posed by currencies like Facebook: once habits are installed, it is very difficult for competitors to gain a share of the market. Another reason is the terrain opened up by quarantine and the multiplication of digital transactions .
In April, images of a virtual wallet circulated for the first time, and representatives of Chinese central banking and advisory companies provided some official explanations about the project. Thus, something quite obvious was known in principle: that its control will be centralized and monitored by the central bank , that is, that the central bank will know exactly who paid who, how much and when. This, they assure from the Chinese government, will reduce corruption since every penny can be tracked from central servers.
Another feature is that this virtual currency will be backed by yuan in circulation and can be used in the same way as electronic money in that country . Electronic payment is so widespread in China that authorities must remind some businesses of the obligation to accept tickets. In that sense, Chinese consumers will not notice a big difference from what they already did.
What effects will this new currency have? It is difficult to foresee exactly what will change for the DCEP, but it is possible to speculate with some possibilities. In the first place, China takes the lead with a development that others feared to use but did not materialize . Far from its reputation as a simple imitator of other technologies, in this case as in 5G, it shows that it is capable of opening borders. The technology behind the DCEP is now available and, its spokespersons say, can process three hundred thousand transactions per second , a number capable of avoiding bottlenecks even during peak demand.
The greatest success of the Chinese cryptocurrency would be that it is used worldwide . The ultimate bet is that it will replace the dollar in international transactions and undermine the financial power of the United States . The technical possibility of the digital yuan, as some call it, to integrate other services is ideal for companies looking for ways to reduce commissions and bank requirements. This ability can make it very tempting and transform it into a global currency, reliable, simple, endorsed by a State and within the reach of any technology company that seeks ways to monetize its development. It is speculation: for now it is not clear how or when the Chinese government will promote its international use.
The project involves, in addition to the Chinese central bank as issuer, three of the four largest banks in the world: the Chinese Industrial and Commercial Bank, the Bank of China and the Chinese Bank of Agriculture . The Alibaba and Tencent corporations are also part of the project . These and other actors will be the first to receive the new currency and distribute it, a small sample of the strong alliance between the Party, government, finance and technology corporations behind a cutting-edge project with global impact . In addition, other partners were invited to do the first tests : among them are none other than Starbucks and McDonalds , two companies associated with the American idiosyncrasy.
Since the end of last year there is talk of an imminent launch that has not yet materialized. Rumors insist that the first tests will be done in May and the public launch in November , but the usual opacity of the projects in that country do not allow us to take anything for granted. Most likely, when it does occur, the echoes will gradually come from the Far East.