China is intensively testing its own virtual currency - the Digital Yuan (Digital Currency Electronic Payment - DCEP). If you are planning to register a company in China, it will be useful to know that the Chinese authorities are accelerating the development and implementation of their own digital currency to stimulate the economy after the COVID-19 pandemic. Beijing is optimistic that its own digital currency will help fight the post-pandemic economic crisis. With its help, the money will go to important sectors of the economy and firms that need support the most. And although the official launch date has not yet been set, it has become known that the Chinese digital currency will be used during the 2022 Beijing Winter Olympics.
According to experts, DCEP will allow individuals and businesses to transfer cash from their regular bank accounts to digital wallets on mobile and other devices, where funds can be stored and used as electronic money. This will significantly accelerate the introduction of digital technologies in the provision of financial services in China.
According to Beijing, the introduction of the digital yuan and the regulation of digital currencies in China will help strengthen national security and data sovereignty outside the global banking system.
Many experts believe that DCEP will not be based on a blockchain. By the way, if in the English-speaking world the name of the ready-to-launch currency of China is translated as "digital currency - electronic means", in Chinese it simply means "digital currency".
That is, in fact, digital yuan is nothing more than a potential replacement for cash in China. However, unlike non-cash payments, there is still a difference: transfers to DCEP can be built between two digital wallets, ie without the participation of banks.
Given that DCEP will be China's "programmable money," the People's Bank of China will have every opportunity to suspend any transaction or even "rollback" it, and this will be very easy. All these factors must be taken into account by those who plan to open a financial business in China.
In addition, the Chinese authorities are expected to establish a DCEP user identification center, an information recording center, and a big data analysis center. This poses considerable risks in terms of freedom of use, anonymity and data confidentiality.
It is important to understand that the regulation of digital currencies in China is likely to be adjusted many times over.If you have questions on the topic of the article, you can sign up for a personal consultation on the regulation of virtual currencies in China.
Our specialists monitor updates and are ready to advise you on Fintech regulation in China. Please reach out to us should you need legal assistance while establishing a business in Asia.