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Recently, China has been testing intensively the Digital Yuan (DCEP – Digital Currency Electronic Payment) – China’s own virtual currency. The Chinese authorities are stimulating the economy after the COVID-19 pandemic by developing their own digital currency. Beijing is convinced that the after-pandemic crisis can be fought with the new virtual currency.
The Digital Yuan is supposed to direct the funds into the crucial economic sectors and help the firms that are desperate for support. Despite the actual issue date not being known so far, it has been said that the Digital Yuan will be in use at the Winter Olympics scheduled to happen in Beijing in 2022.
Experts say that with DCEP both individuals and businesses will have an opportunity to transfer cash from their bank accounts to the new digital wallets on their electronic devices. There they can store and use funds as electronic money. This innovation will considerably speed up the development of digital technologies in China’s financial services provision.
Beijing’s idea is that the new digital currency and the virtual currencies’ regulation in China will make the national security and data sovereignty stronger while outside of the global banking system.
According to multiple forecasts, DCEP will not be founded on the blockchain principle. Also, the new currency’s name to English translates as “digital currency – electronic means”, while in Chinese it just means “digital currency”.
This means that digital yuan will only be an electronic replacement for cash in China. Yet, there is still a difference with the non-cash payments: DCEP transfers can happen between two digital wallets without banks participating.
Since DCEP will be “programmable money” in control of China, the People’s Bank of China always can stop or even return transactions. This fact should be taken into account by individuals who plan to open a financial company in China.
Additionally, the authorities of China will probably establish an identification center for DCEP users that will record information and analyze data about them. This step can be very dangerous for freedom of use, anonymity, and confidentiality.
Briefly, it is crucial to realize that the digital currencies’ regulation in China might be modified over and over. Our specialists in COREDO keep a hand on the pulse of this topic and are prepared to give you a personal consultation. They follow all the changes closely and know everything about fintech regulation in China. Contact us to schedule a meeting.