Chinese digital currency: A threat to financial privacy

The people’s republic of China has been planning to launch a Chinese digital currency for the better part of the decade.

China has been working for a state-run digital currency while at the same time, it is against all privately launched virtual currencies including cryptocurrencies.

Chinese Digital Currency/ Electronic Payment system (DCEP) might be the only virtual currency that is allowed to operate in the country. A similar project that was to be launched by Facebook in the shape of Libra is facing consistent delays. Furthermore, the project may not come online due to Swiss legislators.

How will the Chinese Digital Currency/Electronic Payment system (DCEP) work?

The Chinese DCEP will be a two-layered system launched by the People’s Bank of China (PBoC). The first layer allows the PBoC to interact with other banks in the country to enable them the issuance of DCEp. The second layer would connect these banks to investors like individuals in businesses.

Initially, DCEP was only a perception, and no real work had been done on the project. However, things changed when Facebook announced the launch of Libra. The project’s development rate spiked, apparently because China wanted to beat Facebook to such a network.

The project grew at an incredible rate, and within a week the project leaped from elucidating its objectives to the Party Central Committee to near completion. The deputy director at PBoC, Mu Changchun, stated that the project was almost ready for launch.

Mu stated that the project could not be built on the existing blockchain system, and hence, PBoC would need to create a new network.

Sources report that although people will have anonymity from the other party in a transaction, they will not be able to hide from the state. Although it is a digital currency, it cannot be called a cryptocurrency since it is centralized. The project will give China even more control over the people in the country and perhaps across the globe.

The project’s launch as-is will be another hit to its reputation after the Hong Kong issue. Although China may put out a Libra competitor, would people really invest in it after knowing what it is? BitMEX CEO Arthur Hayes is already against it and has warned people from buying into the project. Arthur stated that people would likely turn to Bitcoin once they realize what the project really is.