China has been labeled a surveillance state by various agencies in the west. As a result, when they announced their CBDC initiative, many people were concerned about China having full access to the financial activities of all its citizens. However, this may not be the case; a recent report by Reuters indicates that the nation might be trying to address those concerns.
It Could Offer China Unprecedented Insight into People’s Lives
China is laying the ground for a CBDC, which had been dubbed the Digital Currency Electronic Payment (DCEP). The blueprint that has been laid out by China’s central bank shows that the central bank would have direct access to all user data as well as full control of the platform. The result could be that China has the type of economic control that other banks, including the Fed, do not have.
According to Mu Changchun, who is in charge of China’s digital currency effort, the bank understands that people would like to maintain their privacy by using physical money. He said those who demand anonymity when using the digital currency would have it. The comments were made at the FinTech Festival, which took place in Singapore.
However, he added that the bank was looking to strike a balance between tax issues, AML, counter-terrorism financing, electronic crime, and online gambling, with the controllable anonymity it would offer its citizens.
About the CBDC
China’s CBDC, which has been dubbed the Digital Currency Electronic Payment (DCEP), will run, in part, on blockchain technology. The central bank plans to disperse it to the masses via a two-tier system. Users will be able to hold the coins in a digital wallet.
The digital currency operates in a similar way to Facebook Libra. The Libra coin has also raised privacy concerns amongst regulators around the world since it was announced. In fact, some lawmakers on Capitol Hill have gone as far as calling for the project to be stopped until various concerns raised by regulators have been addressed.
The Project Could Launch at the Start of 2020
During a recent CNBC interview on the sidelines of the FinTech Festival, Jack Lee, the managing partner of HCM Capital, said that China’s central bank could launch the DCEP in the next three months or less. This was because the network and the system of how they would issue it were already in place. He also said that the bank plans to issue the DCEP to third party payment platforms such as WeChat Pay and Alipay as well as commercial banks. These banks and payment platforms will then disperse the DCEP to the masses.
Daniela Stoffel, an official from Switzerland, said that the issuance of China’s DCEP could be a catalyst for regulators globally to create policies regulating digital currencies. A month ago, China passed a comprehensive cryptography law that is designed to promote the development of the crypto and blockchain sector while also ensuring projects adhere to strict cybersecurity requirements.
Image Source: Flickr / Andrey Filippov
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