May 28, 2023

How will the state cryptocurrency of China work?

How will the state cryptocurrency of China work?

Recently, information was confirmed that the Chinese digital state cryptocurrency will be fully controlled by the Central Bank of China.

It is also reported that the Chinese digital currency DCEP (Digital Currency Electronic Payment) will not be a payment system like Alipay, but will become a valid alternative to banknotes.

Digital currency will be issued centrala bank that regulates emissions. Its value will be tied to the RMB; management will be centralized and based on the blockchain architecture.

In addition, it will be tied to fiat currency,and the reserves will be in the vault of the central bank. The envisaged security system is divided into basic security, data security and transaction security. An encryption system will be used to ensure secure use. In addition, the authentication system ensures that the currency will only be used by those who actually own it.

The project is divided into six stages:

  • Emission;
  • Appeal;
  • Control;
  • Conclusion;
  • Investment and financing;
  • Interbank Regulation.

In an in-depth analysis on governance,There is a direct link to the central bank’s digital currency tracking system; accordingly, it will not be anonymous. The innovation is that the currency can be used offline, that is, transactions can take place even in the absence of an Internet connection.

It is known that individuals and companies will be able toopen wallets at banks and commercial institutions. They must be verified, in addition to the password, authentication will be carried out using biometric data (face recognition or fingerprints).

Operations between digital wallets alsosubject to control for money laundering or terrorist financing. As in the case of fiat currencies, transactions with digital currencies will be limited, therefore it is possible that the exchange of large amounts will depend on the reservation of this amount. In other words, execution will not be instantaneous.