By Staff Reporter
China’s recent pilot launch of the digital currency — known as Digital Currency Electronic Payments or DCEP — will help internationalize the yuan, amongst other things, Karthik Iyer, an ambassador of the P2P Foundation, told BAR in a podcast interview.
Chinese digital currency was launched two weeks ago in Shenzhen in the first phase of its pilot program, and he believes, the launch was a huge success.
“The pilots are a phenomenal success and this is fundamentally going to transform the fintech eco-system. I think it was a huge success,” said Iyer.
Blockchain Service Network
China’s Blockchain Service Network (BSN), he believes, along with DCEP, will transform the “entire financial eco-system of China” and also of those countries with which China is undertaking huge infrastructure projects such as those in the ASEAN region and Africa.
“It is programmable money and you can build all sorts of things on the top of it. It is almost one step ahead of the traditional fintech payment systems,” said Iyer, who runs a consultancy BlockchainMonk.
More significantly, China’s Blockchain Service Network will create uniform blockchain standards across China and will allow the public to build programmable smart contracts on the network in a seamless manner.
“BSN and DCEP will transform the financial eco-system not just in China but all over the world. It is a public framework that enables the people to run nodes on it,” he said.
Currently, there are four pilot banks involved in the Chinese digital currency, namely the Industrial and Commercial Bank of China (ICBC), China Construction Bank, Agricultural Bank of China, and Bank of China. And the three telecoms companies are China Telecom, China Mobile, and China Unicom are part of it.
For this reason and others, China’s DCEP is not exactly blockchain, he said, but the architects of the system have borrowed the concepts such as the Peer-to-Peer and tamper-proof and wallets from blockchain.
But the difference is that the tokens are not mined like in traditional blockchain but they are issued by the central bank. Tokens are minted by the Chinese central bank, People’s Bank of China, given to the four pilot banks.
“When you look at BSN and DCEP, it is a very powerful combination,” he said, adding that “together will transform the entire financial system of China and of the Asian region. The emphasis right now is China and ASEAN and the European region”
Belt and Road Initiative
Indeed, one of the priorities for China is integrating the DCEP with the trade finance platforms so that the digital currency can be used to fuel China’s existing infrastructure projects under the Belt and Road Initiative (BRI).
One of the main reasons DCEP was founded was for its use in international payments and build an alternative to existing payment eco-systems dominated by the Cross-border Interbank Payment Systems (CIPS) and the Society for Worldwide Interbank Financial Telecommunications (SWIFT.)
Having a DCEP will help China to transact between different wallets without having to rely on the two networks in case they are shut down in the event of large-scale conflicts.
“The idea of using DCEP is very powerful. Transacting between different wallets, I think, is where DCEP adding value to China,” he said.
To listen to the podcast of the interview, please click here.