China’s National Cryptocurrency was launched recently. This article tries investigate the currency in all the perspectives.
Amidst the COVID 19 outbreak to stopping the spread, the Chinese Government has announced one of the largest Blockchain-based crypto projects and might have reportedly completed the Pilot testing of the world’s first sovereign centralized digital currency.
According to local media, sources suggest China’s central banks are in the process of drafting legislation for the circulation of its national digital currency by launching Digital Yuan as an electronic payment system or EPS.
The path towards global adoption for cryptocurrencies is not deemed to be seen before 2030, but it seems China is a decade ahead from the world, making biggest announcements, development, and integration of Blockchain-based and cryptographic technology on its home ground.
Despite the Chinese government restricting and banning Bitcoin a few years back, it has secretly been working on a way to adopt Blockchain and cryptocurrency to its centralized banking framework.
According to the Chinese publication, the PBOC (People’s Bank of China) along with the collaboration with private investors, has completed the basic functioning of its cryptocurrency with two major initiatives, one being “DCEP” and second being BSN or “Blockchain-based Service Network”.
China is also planning to launch the next-gen plan of telecommunication and AI technology dubbed as the “Chinese Standards of 2035”.
A Dive into the Past | Origin of China’s National Digital Currency
China’s National Cryptocurrency – how far will it go?
In October 2019, President of China, Xi Jinping, officially announced the development of Blockchain-based technology as one of the top-most priorities of the state and called for a transition towards digital payment system accelerating growth of the banking industry.
By that time speculations of China developing its own cryptocurrency since 2014 somehow came out to be true.
Libra triggered the early adoption of Blockchain in China:
Soon after Facebook CEO Mark Zuckerberg’s announcement of launching ‘Libra’ coin and a prospect of a private organization with 2.3 billion users worldwide issuing its own digital currency gave a glance at how the financial world will look like in the distant future.
The Chinese government called in to accelerate the adoption of Blockchain-based technology after the threat of being dominated by the Chinese emergence of national digital currency was highlighted to the world by Zuckerberg.
China realized instantaneously and took the first-mover advantage in developing its sovereign digital currency outnumbering all its closest competitors. Looking at China, many countries like Sweden, EU, Russia, and South Korea understood what future it may hold to develop their own CBDC’s and announced their take in cryptocurrencies.
The emergence of E-Yuan as National Digital Currency
China has been developing its digital yuan since early 2014. China’s National Cryptocurrency is just the
Pilot tests of a Blockchain-backed digital currency were rolled out in late 2016, eventually announcing the trials helped in reducing circulation costs, increase in transparency, and ruled out money laundering and tax evasion.
These efforts further resulted in the creation of a PBOC backed National Digital Currency Research Institute in mid-2017.
In 2018, the PBOC officially announced in its magazine, China Finance, that it had developed a digital currency that analyzed the need of issuing a true Chinese backed national digital currency.
In 2019, China populated its national cryptography law that granted the Communist Party authority over three encryption fields namely, core, common, and commercial.
China’s unprecedented influence on the global cryptocurrency market accounting for more than 90% of all global trading volume before the BTC ban several years ago. Since then, Chinese Bitcoin exchanges have a foothold on over 45% of the total global cryptocurrency market share at one point.
These significant percentage shows how dependent the global cryptocurrency market is on China.
The rise of the digital yuan as a sovereign digital asset marked a variety of impacting effects in the cryptocurrency market. It allowed China with an added competitive trade advantage and with the devaluation on Yuan, it increased the power of Chinese backed digital currencies, potentially increasing the control on the nation’s monetary policy.
China’s launch of BSN as a part of the country’s digital transformation
China officially launched Blockchain-based Service Network or BSN on April 25, 2020, providing support to the economies, smart cities, and businesses with the latest Blockchain-based applications and infrastructure to launch solutions at lower costs.
According to the reports, BSN has already attracted more than 2000 investors and developers with 128 public nodes hosting.
This macroeconomic move by China to centralize BSN is like the “One Belt-One Initiative” that provides countries with Blockchain-based infrastructure as a first mover and accomplishing the ambition to be the technology leader in the global market.
China has marked and filed the most number of Blockchain patents than any other country and has backing from the most essential infrastructure like banks, telecom and internet providers to successfully test and launch the leading solutions to the world.
BSN is not a Blockchain protocol but a centralized cross-cloud platform designed to unify the fragmented market with the main goal to reduce operational costs, provide flexibility and a regulatory sight to developers and businesses to deploy Blockchain-based digital solutions at affordable costs.
Due to its low price, BSN provides wider access and availability to the world as compared to its competitors that will not only encourage small or large businesses, students, and developers to innovate but will also provide rapid development to China’s economy.
BSN has configured and added Blockchain-based protocols to its pool including Hyperledger Fabric, the open-source conjoint Walmart uses to track its supply chains. The BSN network has provided the same for Chinese protocols to internet giants like Baidu’s Xuper Chain, developed by a consortium of Shenzhen government agencies and tech companies including Tencent and Huawei.
“With China’s BSN and DCEP protocols, more banks will continue to participate in pilot testing to improve the technology, security, and overall stability of the Blockchain-based platform” – states France Research Center.
A local Chinese Magazine, Global Times reported the pilot test run is to be conducted in the country’s 4 major cities namely Shenzhen, Chengdu, Suzhou and Xiong’an to improve the digital functionality of the currency.
The central bank is still testing whether the Blockchain-based platform should combine with 5G in the future for seamless functioning.
China has not yet confirmed with the official date launch for the digital currency but sources rumored and hint towards launch in the mid-2021. It is also predicted that the total size of Chinese digital currency could reach 1 trillion yuan, equivalent to $180 billion and 1/8th of China’s cash flow which in comparison to its competitor cryptocurrency, the total market capitalization of all cryptocurrencies, is estimated to be at $240 billion.
If you want to learn more :
- Cheng, J. (2020, April 20). China Rolls Out Pilot Test of Digital Currency. Retrieved from https://www.wsj.com/articles/china-rolls-out-pilot-test-of-digital-currency-11587385339
- Bram, B. (2020, February 5). Inside China’s mission to create an all-powerful cryptocurrency. Retrieved from https://www.wired.co.uk/article/china-digital-currency-crypto