A generalized report on Baidu revealed new details about the Chinese digital currency. On the one hand, the report confirms something quite obvious, it will be a completely centralized currency in the hands of the Central Bank of China, the PBoC (People's Bank of China).
In the document published by a profile called Future Think Tank and indicating as a source Huatai Securities, it is also mentioned that the Chinese digital currency DCEP (Digital Currency Electronic Payment) will not be a payment system like Alipay, but it will be a valid alternative to banknotes in circulation, which means that it will be an M0 system, an acronym that indicates the monetary base of the banknotes in circulation.
Then, the report describes the differences with Bitcoin, explaining that while the queen of cryptocurrencies is based on blockchain technology and a consensus mechanism that is the Proof of Work, which is de facto digitized and with the risk of high volatility , the Chinese digital currency will be issued by the central bank that regulates its issuance. Its value will be anchored to the Chinese Renminbi, so all management will be centralized and based on a blockchain architecture that is defined in the report as "not pure."
The digital currency will be linked to paper money, with reservations in the central bank vault. The report details the security systems that are being adopted and which are divided into basic security, data security and transaction security. An encryption system will be used to make the use safe. In addition, an authentication system will ensure that the currency is only used by those who really own it.
The project is in an advanced stage
The project is divided into six phases:
- Investments and financing;
- Interbank regulations.
In the in-depth analysis dedicated to management, there is an explicit reference to a digital currency tracking system, which confirms that it will not be an anonymous currency, but will be fully traceable by the central bank. A great innovation lies in the fact that it can also be used offline, that is, transactions can take place even in the absence of the Internet.
The final part of the report is dedicated to digital wallets destined to become the messaging service of the Chinese digital currency. Both people and companies can open their wallets in banks and commercial institutions. The wallets must be verified and authenticated not only by password but also by biometric data (facial recognition or fingerprint) and classic systems used by online banking such as U-Shield.
Transactions between digital wallets will also be subject to controls in case of suspicious use of currency for money laundering or terrorist financing. Like paper currencies, transactions in digital currency will have limits and, therefore, it is not excluded that the exchange of large amounts of money will be subject to the reserve of the amount. In other words, it will not be instantaneous.
The report suggests that China is at an advanced stage in the design and testing of its digital currency. The test phase has been announced recently. With a population of approximately one billion people, China is preparing to be a large-scale testing ground for a digital currency issued by central banks. If the Chinese project is successful, it will encourage other central banks around the world to follow it.