China has gained considerable ground when it comes to progress in Central Bank Digital Currency (CBDC). It has begun to roll out its digital yuan gradually.
Once the deployment is final and complete, the DCEP or digital yuan will become a legal tender. It can be better understood as a state-controlled version of a stablecoin. In one such testing instant, the currency was released on a limited rollout and then removed as the user interest peaked.
The CCB Event – Why Was the DCEP Disabled?
A major Chinese bank – the China Construction Bank (CCB) launched the wallet service in the last few days, without much publicity or fanfare. The registration was said to be accessible by providing a mobile phone number that people used in their bank accounts at CCB. Several users claim to have made transactions using the service, transferring the money from their bank accounts to the wallet.
However, as it became popular and gained widespread attention, the bank closed the service for unknown reasons. The exact time frame of this event couldn’t be determined with certainty.
The search for the digital currency feature in the app, currently returns a “not available” error, with the users being advised to wait patiently. The introduction of the feature and then abrupt discontinuation could be a signal from China to the world, regarding its CBDC capabilities and how close they are to fully implementing it. It is also possible that the feature wasn’t fully ready, couldn’t handle a large number of people, and thus had to be shut down.
Rise Of Mobile Payments And Importance Of CBDC In China
China is the biggest country in the world, in terms of population. It’s citizens, like any other developed country, are fond users of mobile platforms and the internet. According to a report, over 80 percent of the payments were made through mobile devices in 2018.
Once deployed in full, the DCEP can be provided on apps such as Alipay or WeChat Pay. By doing so, China will be hastening the transition towards a cashless nation and providing banking services to the lower echelons of society.
However, the deployment of DCEP is also likely to enhance the Chinese state surveillance over financial matters and allow for tighter regulation of the currency. Unlike cash, which is untraceable, the DCEP can be tracked using digital footprints and via wallet monitoring. The accounts can easily be blacklisted or blocked, for any number of reasons. Given the Chinese state’s track record, there are reservations that the DCEP might reduce anonymity and personal freedom.
About Central Bank Digital Currency (CBDC)
Often described as fiat on the blockchain, the CBDC has been gaining popularity lately with several banks researching their potential and mode of deployment, according to a survey done by the Banks of International Settlements (BIS) in Jan 2020, which took into account the data provided by 66 central banks.
It was found that 80 percent of the banks were actively considering CBDCs and 10 percent were close to deploying it.