Yesterday, on January 30, Chinese internet giant Baidu published a report indicating the role DCEP will play in China’s finance industry.
According to the report, the main steps of the People’s Bank of China can be extended:
- DCEP is set to replace banknotes;
- Centralized management system;
- Only the central authority can track all transactions, not commercial banks.
“Unlike other digital currencies, that exists in a decentralized system such as Bitcoin, [digital currency] uses a centralized management system,” the report says.
Thus, it becomes clear that the People’s Bank Of Bank will act as the issuer of the digital Renminbi, and commercial banks will act as the distributors. The DCEP system includes issues, distribution, management, withdrawal of funds, investments and financing, as well as interbank settlements.
In fact, the central bank is the main authority that creates digital currency and approves transactions. In turn, commercial banks will ask PPC for the issue of digital coins and transactions.
All transactions on the network will be encrypted. The information on transactions will not be transmitted in plain text (as is the case in many ordinary banks). The system will use authentication technology to ensure that the currency is spent only to those parties who own it.
Therefore, an attack on the DCEP system will be virtually impossible.
Wallet for the digital currency will use authentication methods such as codes, biometric codes, and passwords.
PBOC will also be able to process offline transactions. Regardless of the type of transaction, there will be three units that will be responsible for the operation of all components of the system. While some will control the use of digital currency, others will register each person in the system, the latter will analyze the financial data created within the system.
The regulator has been developing the central bank’s digital currency (CBDC) for at least five years. PBoC is currently testing a digital electronic payment system (DCEP). Earlier, the Chinese regulator announced its intention to release its own digital currency ahead of Facebook’s project Libra.
While Facebook’s cryptocurrency plans look vague, the People’s Bank of China is preparing to launch its own coin. It became known that the cryptocurrency was “close to release” in August last year.
Analysts expect this to happen in 2020, as the digital currency testing began in Shenzhen and Suzhou. This will push regulators from other countries to take steps in this direction to avoid lagging behind China. In particular, the Bank of England and the central banks of the EU.