China launched in May this year a national Blockchain platform that will lead to the introduction of a national state cryptocurrency. In fact the first test payments were made last July within its testnet.Source: bitcoinist.com
The Beijing government is serious about this project, which is becoming a reality at high speed given the means available from the Chinese government. Although the Chinese Central Bank has not given an official implementation schedule, the full launch is expected to occur by mid-2021.
This would mean the first official, regulated and legal cryptocurrency in the world, with the support of what will be the first economic power worldwide very soon.
This will mean a global financial change in the system. Many countries will follow in an era of official cryptocurrencies, which will affect the international monetary system and in particular the crypto-yuan may in the future undermine the dominance of Dollar and Euro in international payments, which has not only economic but also geopolitical implications on a global scale.
It is practically inevitable that other countries will do the same to create an economic counterweight, so we are already talking about a crypto-euro and of course the Libra (from Facebook) can be consider as a crypto assimilated to a crypto-dollar. In fact, one of the reasons why China has accelerated its crypto program was the announcement of Libra to create its cryptocurrency although the American government put a stop to it at first. Now it would have the approval of Trump’s administration to also re-launch this American project of its own cryptocurrency.
But, what is the Crypto-Yuan?
Actually, China has been developing the blockchain as a base for its own cryptocurrency since 2014, so the Chinese government allocated more than 45 billion dollars to the project. In fact, there are already more than 84 patents applied for in China in relation to the blockchain technology to undertake the project.Source: diem25.org
In October 2019, President Xi Jinping announced that the development of blockchain technology is a national priority for the state and called on the country's technicians and developers to rapidly develop this area.
In April of this year, China launched the national Blockchain platform as the foundation for a state-owned cryptocurrency called DCEP - Digital Currency Electronic Payment. However, this currency will not only work in the blockchain, but will also take place in two phases: from the Central Bank to the commercial banks, and from these, it will be put into circulation.
Four state-owned banks in China will issue the cryptocurrency: ABC - Agricultural Bank of China, ICBC - Industrial and Commercial Bank of China, the Bank of China and CCB - China Construction Bank
In fact the last bank mentioned, has already opened a crypto-wallet to host the crypto-Yuans last August and can already be requested in the app. of the bank after registration and verification of KYC, although now it is available for citizens of China, Macao and Hong Kong. Currently the wallet supports balance and prepaid card recharges, QR code scanning for payments as well as interbank transfers.
There will be two types of crypto-yuans: for commercial banking and for individuals and legal entities.
The Chinese government also wants to guarantee the liquidity of the Crypto-Yuan with circulating cash and the country's economic agents promise a solid guarantee of the system's liquidity. The Crypto-Yuan will have a 1 to 1 parity with the official conventional Yuan.
What is the reason why China decided to launch an official state cryptocurrency?
For many years now, given the development of Bitcoin mining in China, and being the world's leading producer of mainly crypto currency, it's not surprising that the Chinese government has observed how this industry has developed, and along the way it has implemented policies with different positions, against and in favour, of these developments.
As mentioned above, China has already begun to create developments in blockchain technology, since 2014, as a basis for the creation of a cryptocurrency that can replace or at least compete strongly against Bitcoin and of course against the supremacy of US Dollar in the international financial context.
In the last year, what seems to be the reason why the Chinese government has reinforced these efforts to speed up its crypto project, was the announcement of the launch of the Facebook Libra in the middle of last year, as a project for a centralized cryptocurrency that can be offered to more than 2.7 billion Facebook users around the world, which would have a tremendous global penetration from the first moment of its launch.Source: ledgerinsights.com
According to statements by the CEO of the People's Bank of China (PBoC), Zhou Xiaochuan, the launch of Libra crypto can help develop the payment systems of many countries, however it poses a threat to the cross-border payment system that could weaken national currencies. This bank manager, raises the need for a stronger Yuan through the implementation of the project to create a cryptographic version of the Chinese national currency.
If the coronavirus pandemic wasn’t occurred, China would have been able to launch its crypto much earlier as it was expected during the first half of 2020. Its final launch has been postponed to a year later, during 2021, although the first tests are already being carried out during the last quarter of this year. In fact, the first industry that is serving as a testing ground is the food distribution industry through giants like Meituan Dianping and Tencent Holdings Ltd.
In the context of the creation of large cryptocurrencies supported by the world's most important countries or states, the US, the EU, and Russia, it is inevitable that China will do the same, and this will become an unprecedented race in the global economic context. The creation of a Crypto-Yuan is inevitable and is the most advanced project of all in terms of timing and financial resources allocated to undertake it without delay.