DCEP: China’s new cryptocurrency. Key features and latest updates

China's ditical currency DCEP

🔷1. What is DCEP?

Digital Currency Electronic Payment (DCEP) is issued by the Central Bank of China with Blockchain and Cryptographic technology. This could be considered the world’s first Central bank digital currency (CBDC).

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🔷2. Latest updates

In July 2020, the central bank of China will test DCEP on food delivery platforms operated by the tech giant Meituan Dianping and the car-hailing platform Didi who beat Uber in the Chinese market before. This signals that the mass adoption of the token is coming soon.

On 17th April 2020, DCEP has entered interal testing in 4 places, including Suzhou, Shenzhen, Chengdu, Xiong’an. 4 major national-owned banks, Alipay and WeChat pay participate in developing DCEP. There are some leaks of screenshots from the Agricultural Bank of China. Currently only whitelisted users can register to use DCEP wallet. Digital wallets will be categorized according to the degree of real name, the higher the degree of real name, the higher the wallet amount.

The wage of employees of some district-level government offices, and public institutions in Suzhou, will be paid by the four state-owned banks will complete the installation of DCEP digital wallet in April. In May, 50% of salary will be issued in the form of DCEP.


1. Centralized currency, not decentralized currency. Though it is based on blockchain and cryptographic technology, it is on the oppisite side of decentralized currency, e.g., bitcoin.

2. Dual offline payments. Traditional electronic payments are useless in a signal-less environment, while DC/EP does not require a network to pay, hence the term “dual offline payments” on both sides of the income and expenditure. Using two phones with software installed, just one touch, and the transaction is completed.

3. Belongs to M0 in monetary supply, rather than M2.

  • M0, generally refers to cash in circulation.
  • M1,generally includes M0 + demand deposits in each unit.
  • M2, Includes M1 + savings deposit, e.g., money in Alipay.

4. Double-tier system. A “single-tier operating system” means that the central bank issues digital currencies directly to individuals, “Two-tier operating system” means that the central bank first exchanges digital currencies to banks or other operating institutions, which then exchange them to the public. In order to ensure that the central bank’s digital currency is not over-issued, commercial institutions are required to pay full and 100% of their reserves to the central bank.

5. Anonymity, BUT I question this feature. DCEP aims to combat money laundering and track financial subsidies to enterprises. At present, the power-leasing and corruption are common and serious in the process of allocating financial subsidies. DCEP may be used to fuel enterprises accurately in the future. The tracks of using DCEP can also help the government to monitor and optimize these fiscal stimulus plans.


1. Take over the dominant position of Alipay and WeChat Pay. In 2017, the central bank revised some regulations and increased the reserve fund, which weakened the ability of third-party payments such as Alipay and WeChat to compete with commercial banks. Then in 2018, the centralized deposit ratio of the payment institution’s customer reserves is increased from the current 20% to about 50%.

2. The internationalization of RMB/CNY. There is no free circulation and exchange of mainland China, so the central bank of China has been useing Hong Kong as the offshore exchanging center to test the floating exchange rate of RMB. China is trying to break and rebuild the international monetary system ruled by the USD.

The overseas version of People’s Daily just posted an article about DCEP. It describes DCEP as “a supplement to restrict the excessively arbitrary fluctuations of the US dollar and reduce the occurrence of a global disaster caused by the US dollar crisis.” DCEP aims to modify the international monetary system which is based on the US dollar standard. “When the US economy has problems, the monetary policy of the Fed will have a joint impact on other countries.”

Backed by USD, other strong currencies and the Libra association, Libra will pose threats on the monetary sovereignty of developing countries. People in these countries may hold Libra to hedge against the risk of national currency devaluation, some countries may lose control of the exchanging rates, like what happened to Thai Baht during the 1990s’ Asian financial crisis.The rise of Libra may threaten China’s control of RMB and foreign currencies, so it is wise for the central bank of China to move in advance.

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