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Didi Chuxing ,Conducting The First Real World Trial of Digital Yuan

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Didi Chuxing-what many consider China’s  Uber to be conducting a test on the digital Yuan. As per Wednesday’s announcement, Didi joined the list of companies and banks to test China’s digital yuan developed by the People’s Bank of China (PBOC). The new electronic exchange medium will be known as the Digital Currency Electronic Payment (DCEP).
The ride-sharing giant features at least 550 million users and appears to be an appropriate platform to test the China’s digital yuan as a form of digital cash payment. This comes just a few days ahead of an expert analysis citing that the China’s Digital Yuan was only here to compete with the US dollar, not Bitcoin.

China Digital Renminbi, The First Mover of Stablecoin Space

Apparently, the cryptocurrency community has been monitoring the central bank’s digital payment system since China announced the development of a stablecoin.

Researchers at the Bank of America,  have stated that China is the first mover in the CBDC area; and have recognized the digital renminbi as a welcome asset for regional trading partners. This, the analysts claim, is on the belief that payments are becoming more electronic and cashless. Thus, making the China’s  a candidate that would most likely disrupt the US dollar.

Nevertheless, ahead of the first real-world trial of the China’s digital yuan, the Chinese Central Bank had initially launched mini-trials across four Chinese cities. The tests were carried out through various partnerships between the Central Bank, Starbucks, McDonald’s and Subway. These tests were the first phase of the trial, and the nation is now preparing to enter the next phase.

According to the People’s Bank of China Strategy and the timeline for the DCEP (Digital Currency Electronic Payment), Didi Chuxing and the Central Bank Task Force will be strategizing, designing and piloting the payment system with strict safety, governance, regulation and security precautions.

However, PBoC focuses on testing the digital stable coin as a native token on the Ride-Sharing application. It seems that the successful DiDi real-world test will lead to the final launch of the DCEP system. In fact, an official at the People’s Bank of China suggested plans to have a China’s digital yuan in use during the Beijing Olympics in 2022.

China’s Mission To Creating an All Powerful Stablecoin

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Blockchain and the cryptocurrency race is the most interesting innovation since the advent of the internet in the 90s. Cryptocurrencies have been around since taking over the financial world.

With the world’s most powerful economies and corporations drafting plans to launch their digital currencies. China and Facebook are leading in this front respectively. On the other hand, Satoshi Nakamoto’s Bitcoin leading the entire battalion of crypto markets. 

There had been chances of witnessing the world’s first digital currency in 2019. However, China has pushed the launch date. Global financial enthusiasts are anticipating a 2020 debut of China’s stablecoin. Meanwhile, this very significant launch will also be the basis of a new Digital Currency/Electronic Payment system  (DCEP).

China’s penetration into a leading supplier of global consumer products threatens several other leading economies with its digital payment system.

For instance exports and imports through China will have to go through the DCEP. A signal that the country is creating an efficient and legal payment system to complement global trade. 

China Central Bank
Credit: pbc.gov.cn

It is worth noting the difference between China Digital Currency Electronic Payment  (DCEP) and other existing cryptocurrencies. The bitcoin blockchain, for instance, controls the value source of bitcoins through an algorithm. Furthermore, technologists mine bitcoins in a decentralized ledger. 

On the other hand is DCEP, a model that the government sanctions and with at least 50 registered patents.  All patents relating to the distribution of currency through traditional financial institutions. Features that make DCEP centralized and a striking resemblance with traditional fiat.

Additionally, only the government will have control of the blockchain ledger rather than distributed across the system. DCEP will follow the normal model of paper money.

In fact, the government will integrate into the commercial ecosystem. The Chinese payment system will also effectively reduce initiation constraints due to time lags. According to Wired, the government will not deploy the ledger to mining nodes.

Hence and unlike bitcoin, it will have daily practical usability. Well, the fact that the system will peg the value of the coin to the valuation of Yuan -; the Digital renminbi won’t trade as fractions. Blockchain analysts hope that the system will be easy to use;  since daily users anticipate a platform that is no different from existing payment platforms. 

Nonetheless, people have questioned China’s move to crack down bitcoin trading. Facebook’s Libra coin has also become a global bone of contention. A situation that reveals that central banks are warming up for the digital currency era; 

But still, find other digital currency potentially a threat. 

Especially when such digital currencies are out of their control. Or rather when they pose a threat to a nation’s financial security. China cracked down on crypto trading activities back in 2017 when it shut down at least 173 crypto trading platforms. 

China feels that the United States has been benefiting from global trade. A former member of the NDRC said: 

“When we trade with the Philippines, and we use the regular financial system, both of us convert into dollars. It’s the US who benefits from that trade.”

Launching the DCEP will enable China to effectively navigate its activities without the need for the US dollar. 

And just like that, the United States will have to grapple with an autonomous economy toppling it from being the world reserve currency.