Crypto-yuan: An application ready to be tested?

A virtual currency towards other economies

Pandemic and virtual money, where are we now?

An application to be tested in four cities

digital yuan, application,crypto

A mobile application to store and exchange the digital yuan will be tested according to the confirmation of the Chinese central bank.

For China, which has often actively suppressed transactions involving virtual currencies for several years, we were all surprised to learn that it is going to create its own virtual currency. In 2017, China has even banned virtual currency transactions and fundraising (ICO). In February 2018, Alibaba, one of the flagships of Chinese technology, pledged to “never create a virtual currency”. However, China was closely following Blockchain technology and now one of the biggest powers is going to have crypto-yuan or DCEP (Digital Currency Electronic Payment).

Let’s go back to September 2019 when the Chinese central bank is about to launch a virtual currency supported by the Chinese government, nicknamed DC/EP (Digital Currency/Electronic Payments). It turns out that the central bank of China has been working on this subject for five years and the reason for this initiative is to “protect” its foreign exchange sovereignty. A currency that could help improve risk management and reduce financial malpractice. The Forbes newspaper claimed to have a release date: November 11, Singles’ Day, China’s big sales day.

The head of the People’s Bank of China, Yi Gang, said that the future virtual currency would be associated with the electronic payment methods (WeChat, AliPay…) that the Chinese already use on smartphones to pay for most of their purchases.

According to Jeremy Allaire, CEO OF CIRCLE, this becomes a mechanism by which (the Yuan) can be used in daily transactions around the world. China’s new digital currency could encourage the use of the yuan worldwide.

“I think it really serves several purposes. But, I think the biggest opportunity here is a way for the Chinese yuan to be distributed around the world,” added Jeremy Allaire.

It is important to know that the Chinese central bank’s announcements came at a time when Facebook was planning to launch Libra. The government fears it will be overtaken by the future currency of the American Facebook, although the site is blocked in China. Libra would have been a major source of concern for Beijing.

“Like Bitcoin, Libra poses a threat to the yuan. China’s central bank needs to stay on board as the use of paper money declines,” said Song Houze, a Chinese economic expert and member of the MacroPolo think tank.

Admittedly, we want to know everything on the subject, but it is only through leaks that we have had more information on the project, which seems to be in the process of becoming a reality. We cannot also deny the effects of the pandemic that has been affecting the world for the past few months. For example, many banks have injected large amounts of money into the financial system and have cleaned up large amounts literally. Central banks such as South Korea’s have quarantined and disinfected potentially contaminated bank notes. China, however, is also accelerating crypto-yuan.

At the beginning of the year, the PBoC stated that digital currency was “progressing smoothly” and that its “high-level” design was complete. By March 24, the Bank of China would have completed the development of the basic functions of the currency and had already moved on to drafting laws for its implementation. The Chinese monetary authority announced that it would now conduct “in-depth research” on the implementation of the DCEP, including to safeguard it from any cyber security risks.

In mid-April, social media users also think they have captured screenshots of a beta version of the much-anticipated digital currency of the Chinese Central Bank (CBDC). WeChat users would have had access to these screenshots last Tuesday. Then there were screenshots of an alleged pilot version of a wallet application for the upcoming Chinese digital yuan that have been circulating for some time on social networks. This is a photograph showing what could be the Chinese digital currency management application. By the way, it was Ling Zhang, executive director of mergers and acquisitions at Global Fiat, who first shared the images on April 14 and then retweeted them with the stock exchange’s CEO, Changpeng Zhao.

Captured screenshots of a beta version

The PBoC has not yet given a precise timetable for the projects, but the Chinese central bank has confirmed that it will test a mobile application to store and exchange the digital yuan. This app belongs to the state-led pilot in the four cities involved.

According to Ling Zhang, an application is available for download in four cities selected for the first trial — Shenzhen, Chengdu, Suzhou and Xiongan. She highlights the inclusion of Xiongan, a new metropolis on the outskirts of Beijing, which has been the site of a “smart city brain project”. The same four cities were named on a registration page for the test application.

“The rumour about DECP on the Internet is part of the test in our research and development process and does not mean that the digital yuan has been officially launched,” said an unnamed official of the China Digital Currency Institute in the release.

Another test will be conducted at the Winter Olympics in Beijing in 2022.

Gradually, after China, other central banks are also starting to create virtual money. According to a report by the Bank for International Settlements, 20% of central banks plan to issue a regulated digital currency, a CBDC, within the next 6 years. A few have already tried it, but so far only China has gone far.

Written by Laetisia Harson, Project Manager at Magna Numeris

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Magna Numeris is a startup developing solutions for cryptocurrency users, pushing the boundaries of conventional platforms to help grow the peer-to-peer economy