DCEP: Chinese Official Cryptocurrency vs Libra

DCEP, the Digitial Currency Electronic Payment, DC/EP) is China’s electronic currency. When Xi JinPing, China’s Chairman, talked about blockchain, he meant not the various crypto currencies flourishing abroad or the crypto ponzis flourishing inland, but in particular about the benefits blockchain can bring to China.

DCEP is a blockchain based currency. Details are not fully known, but it is clear that it is not a public blockchain in the sense that anyone can be a validator. People be like, China adopts blockchain, crypto to the moon! This is not what’s happening. It is more a centralised architecture, for several reasons. First, purely practical, currently blockchains do not scale. For a currency that is supposed to reach millions of TPS (Trasactions per Second), as happens around 11/11 or Chinese New Year (the Chinese shopping sprees), you need something reliably scalable.

Second, the Chinese government (or the Party, but let’s not dwelve into too much detail) aims at keeping some control over the economy, and society in general. The transparency of blockchain based currencies is a treat. Instead of opaque cash or shady bank transfers and bank ledger manipulation, most important transfers can be forced to go through validators; while small transactions could happen off-chain, such as buying a coffee or some Beef noodles, arbitrarily large or small transactions could be totally traced.

So DCEP allows China to spread the use of Renminbi that DCEP will be pegged too, thanks to easy transfers. The US have been controlling money flows for over 70 years, and allowed themselves to put economic sanctions on countries it disliked, like Iran, for reasons more akin to their own interest than for “bright future”. While it comes with string attached, we can expect the countries who have good relations with China and not so good with the US to switch from SWIFT transfers and turn toward China’s DCEP.

Leave a Reply

Your email address will not be published. Required fields are marked *