China’s proposed digital currency – working title “Digital Currency Electronic Payment (DCEP)” — is not about control, a state banking official said this week. But he claimed it will help to more effectively monitor money-laundering, tax evasion, terrorist financing, online gambling and other cybercrimes.
Reuters reports that Mu Changchun, head of the People’s Bank of China’s digital currency research institute, told a conference in Singapore Tuesday that the Chinese government acknowledges that people would prefer the anonymity of using paper money and coins. But the new currency would provide “controllable anonymity,” he said.
“That is a balance we have to keep, and that is our goal,” Mu explained. “We are not seeking full control of the information of the general public.”
Could DCEP Replace Yuan?
Mu did not provide a timescale for the roll-out of DCEP, a project that has been five years in the making. But he did say it was “almost ready,” which means China will likely soon become the first nation to launch its own domestic cryptocurrency.
Details on DCEP are thin on the ground, other than that the currency will partially be based on blockchain – the technology that underpins cryptocurrencies like bitcoin and soon, Facebook’s Libra.
Mu said DCEP would be distributed by the People’s Bank of China to commercial banks and domestic third-party payment networks like Alipay and WeChat Pay.
At least initially, the currency will coexist alongside fiat money. But it has been speculated that should the experiment prove successful, it could one day replace the yuan entirely.
Mu said DCEP would boost financial inclusion in rural areas. But Reuters suggested the currency’s design “seemingly provides Beijing with unprecedented oversight over money flows, giving Chinese authorities a degree of control over their economy that most central banks do not have.”
Gambling is illegal in mainland China except for the state lottery and the state-controlled sports lottery. The central government operates an enormous program of domestic internet regulation and censorship, which has been dubbed “the Great Firewall,” and which blocks web domains of online gambling operators and other undesirable sites.
But China’s vast army of internet cops are playing whack-a-mole with illegal operators, many of whom are based in the Philippines and will simply move to a new URL once a previous domain is blocked.
Chinese gamblers can use rogue third-party payment providers to make deposits into offshore online gambling accounts, or make payments to proxy bettors through social media platforms that support such transactions, although authorities are taking every effort to stamp this out.
While it’s not completely clear yet how DCEP works, it could well provide another layer of control in China’s ceaseless battle against illegal gambling.