China is on the verge of becoming a cashless society. Four out of every five payments in 2019 were made through Tencent’s WeChat Pay or Alibaba’s Alipay. Online currency is fast replacing traditional banking systems. Chandler Guo, who set up a large-scale 2014 endeavor to mine the popular Bitcoin currency, says that “with digital currency, everyone has the right to enter. The threshold to enter is really low.” Mr Guo, who used hydroelectric power to “mine” Bitcoin using dozens of computers, was at one point able to mine 30% of the world’s Bitcoin. He felt that Bitcoin would become an international currency even more powerful than the dollar.
He now feels the same about the DCEP—he credits the currency’s potential success to the fact that there are “39 million Chinese living outside of the country.” He believes those expats can make the DCEP an international currency. The decentralised nature of online currency proved to be a selling point for Bitcoin, but Stewart Mackenzie, an expert on cryptocurrency residing in Hong Kong, claims that the new payment system being set up by the Chinese government, known as Digital Currency Electronic Payment (DCEP), is “the antithesis to Bitcoin.”
Mackenzie clarifies that “the ultimate goal of a cryptocurrency is the separation of money and state,” but many fear that the Chinese Communist Party will use the new payment system against it’s citizens as a tool of espionage. It will be just as regulated as the Yuen, with the movement of the currency being easily traceable to the government. Mackenzie’s sentiments are seconded by financial analyst Linghao Bao, working for Beijing based company Trivium. Mr Bao says that “DCEP is built on an idea of centralised control. The value of Bitcoin lies in its decentralisation nature and its isolation from the financial system.”
DCEP uses blockchain, much like bitcoin, meaning that it uses a distributed log of every transaction ever made on that network. It takes the traditional middle man, the bank, out of the equation. However, DCEP will be launched by the People’s Bank of China, although no specific date has been set for the cryptocurrency’s launch. The digital currency allows users to successfully move money freely between electronic wallets and bank cards, as a test run earlier this year showed. Mr Bao further suggests that the People’s Bank of a China is “under a lot of pressure” to hasten the process of launching the currency as “they do not want to be in a world where Libra (the digital currency of social media giant, Facebook) becomes the global currency.”
A Chinese cryptocurrency observer, who wished to stay anonymous, comments that “the Chinese government believes that if some other countries can also use the Chinese currency it can break the United States’ monetary sovereignty.” The current global financial system, he says, was built by the United States. He believes that China is already ahead of the US in what Mr Linghao Bao terms “financial warfare.”
After criticism that it “threatened the monetary sovereignty of governments,” Facebook trimmed down it’s plans for Libra, but China remains wary. An e-wallet, Novi, will be launched by the company later this year. But China’s digital payment systems are already regarded as the world’s most developed. Yet, despite DCEP’s predicted success by experts such as Bitcoin founder Mr Guo, some, such as Bitfool, will remain loyal to the older and more anarchic Bitcoin. He says, “I trust Bitcoin more. Because it really belongs to me.”