![]() The certification authority, the registration center and the big data analytic center associated with the DCEP, enable the central bank to monitor the currency circulation easily and therefore apply the monetary policies timely and precisely. Similar to the bill-issuance before, the digital yuan will be issued by the central bank to the commercial banks, and therefore be accessed to the public with normal banking services. Unlike Alipay and WeChat Pay, DCEP is a complimentary and legal tender that can never be rejected by any merchants. With the application of blockchain, the central bank can easily track the entire cashflow chain with every payment identified. ![]() The digital yuan is the M0 (see the explanation in the chart below), which represents the cash in circulation in macroeconomics theory, and the virtual form of cash will not impact the currency issuance. The liquidity of cash is increasing, but in a digital form instead of the bills. Even in the rural areas, the penetration surpassed 70%. In a report published by People's Bank of China, the proportion of digital payment usage among adults in China was recorded at 82.39% at the end of 2018. This naming approach is therefore broad and ambitious, and both builds upon and may occlude the developments of the digital giants. In light of factors like the increasing anti-counterfeiting costs on issuing paper notes, but with decreasing usage frequency, and the attraction of more efficient supervision, the central bank debuted the digital yuan.Īpparently, DCEP is to be introduced to cover the concept of electronic payment in general in China – the name hints that DC represents the new form of cash, and EP is to be the new payment. DC/EP: Digitalizing the currency for mass electronic payment Let us take a closer look at the new buzzword. Looks like DCEP is starting to reshape the public's life in China now. Some government employees in Suzhou have even started to receive their payrolls in digital yuan. What is more, the state announced that DCEP would be tested internally in Shenzhen, Suzhou, Chengdu – and Xiong'an, a Beijing's satellite town that has recently attracted a significant amount of investment from the government, which is planning to turn it into China’s next innovation hub. Meituan Dianping (03690:HK) is another case: the local service provider, with daily transactions over billions of USD, is also discussing the application of DCEP. ![]() One example is the country’s ride-hailing giant DiDi, which has inked a deal with the monetary authority to apply and test the digital yuan in the smart traveling field. On August 3 of 2020, the central bank announced the launch of Digital Currency Electronic Payment (DCEP).Īlong with the launch, some Chinese Internet companies have reached an agreement with the central bank to pilot the digital currency trial. The new project’s competitiveness in the market is yet to be determined.Ĭhina has been planning to replace the bills with digital currency since at least 2014. Ant Group’s Alipay and Tencent’s WeChat Pay. The DCEP, the Chinese government’s new project, will digitalize the cash in circulation, becoming an alternative to the local tech giants’ payment products, i.e.
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