In 2020 the main world news about blockchain and cryptocurrency come mainly from China, whose policy in this sphere was already called “super-aggressive”. Mining state calls blockchain the main innovative technology, they say it fuels the competitive environment for the crypto business and connects large bankers and telecommunications giants.
On April 18, 2020, the Agricultural Bank of China launched a test application for using the national cryptocurrency. The acronym “DCEP” (Digital Currency Electronic Payment) is increasingly discussed in the analytic community. The app became available in test mode in large cities of the country.
The system created by the Agricultural Bank includes two types of digital currency. The first is the currency for commercial banks. The second is the issue of digital money for individuals and legal entities by commercial banks.
Although mobile payments through Alipay and WeChat Pay have been used in the daily life of the Chinese for a long time already, the government made another step and created a new cryptocurrency.
The digitalization of the global financial Chinese system and the widespread adoption of blockchain technology — that is a future caused by the actions of China, which initially remained wary of such initiatives.
A little bit of history
In October 2019 Xi Jinping, the President of China announced that the development of blockchain technology is one of the state’s priority tasks and called for boosting the development of this sphere in the country. It was heard by the grapevine that China started developing its own cryptocurrency in early 2014. The news about new crypto periodically popped up, although according to the experts, the country was more associated with strict regulatory actions. The industry was even included in the preliminary list of industries that should be banned and some blockchain conferences were closed by the police.
Much has changed with the release of Libra (Facebook cryptocurrency). Facebook is a private company with 2.3 billion users worldwide and the prospect of issuing its own currency could potentially turn the project into the main global cryptocurrency.
China took this as an incentive. First of all, an incentive to push the dollar out of the electronic payment market, and in the future, to change the entire global financial system. Looking at the example of China, and realizing what opportunities might be missed, many other countries have announced the development of their CBDC (Central Bank Digital Currency). For example, the European Central Bank, the Central Bank of South Korea, Russia, Sweden, and several other countries talk about their own developments in the field of state cryptocurrencies.
Forbes has placed the launch of the DCEP in the first place on the list of the most influential events that will determine the blockchain ecosystem in 2020.
However, China has always been the largest cryptocurrency miner. Huge mining farms and some of the largest cryptocurrency exchanges are based here. And while Xi Jinping’s statement was logical and expected, official support from the authorities led to major investments and blockchain research. The Chinese telecommunications giants have been given the green light to freely innovate. In fact, they were given tremendous power. Immediately after the October announcement, shares of Chinese technology companies rose significantly, as well as Bitcoin prices. Requests for the term “blockchain” in the Chinese searching engines have grown up 60 times.
The scale of China’s actions is huge nowadays. One of China’s largest commercial banks, Bank of China (BoC), issued blockchain bonds for $2.8 billion. Two-year bonds will go on sale with an interest rate on the coupon of 3.25% per annum.
The Bank of China intends to direct the raised funds to support small and medium-sized businesses. Entrepreneurs will be able to obtain loans at lower rates since the blockchain system allows the bank to reduce the cost of issuing and circulating debt instruments.
What positive changes will the project bring?
The introduction of the DCEP system will help the People’s Bank of China reduce the cost of issuing money. It will also help reduce the commercial banks’ costs in transactions, improve the business climate in the field of innovation, and minimize risks. When making an interbank transfer using the new currency, users will not be charged a transaction fee. DCEP will allow us to make transfers within the country and abroad easily. It is most likely that the DCEP platform will have more opportunities and advantages. Now the world needs to accept the fact that the monetary and financial system has entered a new era.