Crypto Yuan is China's digital currency, which belongs to the Government. Its development has been going on since 2014. And already at the upcoming 2022 Olympics, which will be held in this country, the Crypto Yuan is planned to be used as a means of payment. It is not yet clear what to expect from the new national digital currency. But the government support and the involvement of banking structures in its development are already guaranteed.
Chronology of Events
The world got informed that China plans to launch its own digital currency relatively recently. And many were surprised that the work on this project had been carried out since 2014. China does not hide that the impetus for this was the development of the Facebook currency Libra. The actual work on creating a digital currency was entrusted to the Digital Currency Research Institute. The chronology of events can be summarized as follows:
- In August 2019, The Central Bank of China announced the successful completion of work on the cryptocurrency. And it happened in 5 years after the start of the project.
- December 2019. It was announced that the development of these coins has entered the home stretch.
- April 15, 2020. One of the PRC banks released a mobile application for testing. They even filmed a video of the process of exchanging ordinary yuan for Crypto Yuan.
- April 16, 2020. The launch of the currency in a more extensive test mode appeared.
- June 2020. The Central Bank of China reported that work on the side of the server of the new digital currency has been completed.
- After this, active informing about the state of the cryptocurrency ended. And today there is no data on the further development of the project.
What Is Known at the Moment
The name of the future cryptocurrency is DC / EP, which stands for Digital Currency Electronic Payment. There is no official confirmation from the central bank regarding the implementation schedule. But experts are confident that this will happen very soon.
This currency, like many other digital ones, can be used to send and receive payments. But of course, the Chinese went further. They came up with the touch and touch function, which creates the transfer of a digital asset from one user to another by touching with mobile phones. And for this, you do not need an Internet connection. An NFC or Bluetooth module is enough. Most likely, this technology provides that after the Internet connection appears, the transfer or receipt of funds will be credited. So far, this is only an assumption because not much is known about the mechanism of action of such an interesting function.
Also, the transition option will be done in the following ways:
- By account number.
- By generating and scanning a QR code.
Other nuances that are worth paying attention to are the following:
- It is expected that the number of transactions per second will reach 300 thousand. Due to this speed, the Crypto Yuan is likely to gain popularity in financial transactions, including the field of small retail.
- Of course, Crypto Yuan will not be decentralized. Its release and circulation will be controlled.
- The currency will work not only on the blockchain. The emission will be the task of the central bank, which will issue coins. And commercial ones will be put into circulation.
- In addition, organizations and banks can become issuers. But for this, they will need to provide collateral for fiat currencies or other assets.
- According to China's plan, Cryptoyuan should significantly expand financial inclusion in the country.
- One of the tasks pursued by the government is to obtain sovereignty by the Crypto Yuan, the same as that of the fiat yuan. For this, its holders will receive guarantees of liquidity.
Like any other state, PRC is careful about the huge spread of cryptocurrency. Therefore, the national one is being developed as an alternative to Bitcoin and numerous altcoins. According to the Central Bank, such a currency, issued domestically and supported by the government, will help to limit the emission of private currencies and reduce the risk of financial instability.
And the fact is that DC / EP is planned to be widely used at the upcoming Olympic Games in 2022.
How It Will Work and Why It Is Created
The goals of creating the governments' cryptocurrency were clearly outlined. It will work in 2 main directions, which are the following:
- As an electronic payment system in retail.
- Payments between financial institutions on a cross-border scale will be done.
According to Chinese financiers, this will help to reduce the risks of standard financial systems and make them more efficient.
The details of the work were announced in 2019. As it is said in the plan, the digital yuan will not be completely based on the blockchain. Other technologies will be applied to help significantly increase throughput. An important point is the use of a two-level security system. It is planned that the Central Bank will control operations with the Crypto Yuan. And the task of spreading the currency falls entirely on commercial banks.
It is not yet known for sure who will be engaged in the issue of coins. It is assumed that these will be commercial banks, but only after obtaining permission from the Central Bank. There is another version that the emission is in the hands of the Central Bank, and commercial banks will become distributors.
Another feature of the Digital Yuan is that it will be a controlled-anonymous coin. China will not give complete confidentiality to the turnover, justifying this by the fact that such a measure is necessary to prevent money laundering.
Earning Opportunities
Although there is no real turnover yet, people are already actively talking about how it will be possible to make money on this cryptocurrency. At the initial stage, several organizations will receive the right to use the currency. These are 4 major banks, Alibaba corporations and Tencent, as well as the Union Pay payment system. It is planned to gradually expand this list.
The Chinese government is confident that by launching the digital currency itself, it will be possible to bring the yuan to the international level. Even more, they think they will be able to make it an instrument of trade relations. Actually, this is what the blockchain is for.
Only after the strengthening, it will become possible to freely sell and buy CBDC. But it still will not be possible to make money on mining. The emission will be entirely in the hands of the state. For ordinary holders, earning opportunities will lie in speculating on the currency rate.
It is assumed that the main advantage is that the Crypto Yuan will be a highly liquid payment instrument. Holders do not have to pay interest. They are free from credit risks. Therefore, it will be beneficial to keep your funds in CBCD.
Concerns and Forecasts
The Chinese authorities plan to make Beijing the center of blockchain innovation by 2022. According to the existing development plan, by this time, the infrastructure of the city will be fully integrated with applications based on this modern technology. Moreover, the authors of the project are confident that the transformation will turn Beijing into a center for innovations and demonstrations of blockchain-based projects.
Logically, the digital currency will become the connecting link. Crypto Yuan will become an integrated currency. Many international experts fear the release of Crypto Yuan. Representatives of the Japanese Ministry of Finance argue that the Digital Yuan will provoke chaos in the global economy. Other experts are confident that the rate of development of crypto technologies in China is significantly higher than in other countries. And due to this, the PRC will become a leader in the field of technical developments in this area.
What Lies Ahead for the Crypto Yuan
Although the launch of the Crypto Yuan has not happened yet, many are confident that this crypto project will be significantly more viable than many others. It also includes Libra, which pushed to start working on the national digital currency. And this is even despite the fact that it cannot be precisely called decentralized and unregulated. You should not expect anonymity here. Otherwise, they will not be able to cope with money laundering.
Even in the form of a concept idea, Crypto Yuan is devoid of the disadvantages of other digital currencies. But it has many of their advantages. For example, with its help, it will be possible to make instant transactions, the currency will be reliable, unchangeable, and irreversible. But its sovereignty, similar to the fiat currency of China, will definitely be appreciated by many. That is, the holders of the Crypto Yuan will be confident in the liquidity of the currency. China has a real opportunity to become the first global competitor to existing cryptocurrencies.
Active work on Crypto Yuan cannot but make the United States really worried. The projects that are developing in China are actively suppressed and simply not supported by the USA. The example is the way how they slowed down the launch of Libra and literally destroyed TON. The PRC may introduce its own product, which is likely to try to destroy the dollar's global dominance.
But this will be possible only if China decides to create an open, liberalized financial system that can be realistically applied on a global scale. So far, too much effort is not being made for this because the weakening of control is very difficult for China. And without this, the outlet into the outside world will not take place.