Envision sending cash from your phone with little to zero cost in just a few snaps. Or on the other hand, by filtering the code through your mobile phone, imagine paying bought staple products, garments or even some espresso. That would be reasonably quick, advantageous, and easy for everybody, right? You currently have an online wallet with only your mobile phone and a good internet affiliation which you can transmit and conduct wherever you go.
What is DCEP, China’s Sovereign Currency
China’s sovereign digital currency version, the so-called Digital Currency Electronic Payment (DCEP), will be used to simulate regular banking operations, including transfers, deposits, and digital wallet withdrawals.
Upon launch, consumers would download an electronic wallet application approved by the People’s Bank of China (PBOC), which they would then connect to a bank card to start paying or receiving digital yuan using a merchant’s mobile phone or making transactions with an ATM machine and other users.
The money from the relevant bank account will be converted on a one-to-one basis to digital currency. There is also an option that does not require a bank account to hold and conduct transactions in the digital yuan.
In comparison to other online payment systems already widely used in China, including Alibaba’s Alipay and Tencent’s WeChat Pay, the DCEP system facilitates payment transactions even without an internet connection. The “tap and click” feature allows two people to simply tap their mobile devices together to make a transfer, leaving no record of transfers with a third party or with the banking system.
The digital yuan, known as M0, but in digital form, is part of the most liquid form of money supply, which includes notes and coins in circulation in society. It is emitted and backed by the central bank of the country.
Why does China want to have a digital currency of its own?
China’s version of a sovereign digital currency is expected to revolutionize regulatory authorities’ ability to scrutinize the payment and financial system of the nation as officials can gain more control to monitor how its citizens use money.
“The two defining historical events of 2020 will be the coronavirus pandemic, looking back years later, and the other would be [China’s] digital currency,” said Xu Yuan, a senior researcher with the Digital Finance Research Center of Peking University.
From a regulatory perspective, the advent of a digital currency will allow online payment transactions, rendering all cash flows traceable in society, according to Xu.
As more business operations and financial transactions are transferred online to store cash flow details and credit data in a database, it becomes easier to assess the credit structure of the overall organization. The new credit image may have an impact on the supervisory system, resulting in changes in its strategies, means, and effects, Xu said.
It is possible to search the database in real-time and play a role in preserving digital records and checks against individuals who have committed money laundering, tax evasion or other related crimes.
The Digital Currency Electronic Payment (DCEP) means the currency. That’s partly because it’s a two-tier currency, with the commercial banks turning some of their central bank deposits into digital currency in the first half. And the banks then sell to customers this digital currency. The system is structured to mimic the manner in which physical cash is distributed.
The four participating state-owned banks are China’s Industrial and Commercial Bank (ICBC), China Construction Bank, China Bank for Agriculture, and Bank of China. And China Telecom, China Mobile, and China Unicom are the three companies in the telecoms market.
The Electronic Digital Currency Payment (DCEP) means the currency. This is partly because it is a two-tier currency, with commercial banks in the first half converting some of their central bank deposits into digital currency. And the banks then offer the digital currency to their customers. The system is designed to imitate the way actual cash is allocated.
China’s Industrial and Commercial Bank (ICBC), China Construction Bank, China Bank for Agriculture, and Bank of China are the four participating state-owned banks. And the three players in the telecoms industry are China Telecom, China Mobile, and China Unicom.
While Alipay and Tencent’s WeChat / WePay, the dominant digital payment firms, are not yet formally involved in the pilots, the firms have been in contact with the authorities, and at some stage, they are expected to participate in tests.
At the “Eighth China Payment and Clearing Conference,” the PBoC deputy governor, Fan Yifei, was speaking. In the same situation, the Beijing News cites him as concentrating on oversight. In particular, specialist payment companies created problems for the PBoC because there was a lack of transparency or supervisory capability for the central bank for some time, which has since been rectified.