“China is a sleeping giant. Let her sleep, for when she wakes she will move the world.” ― Napoleon Bonaparte
Around the end of 2019, People’s Bank of China announced that it is close to complete and launch a new cryptocurrency called “Digital Yuan”, becoming the official cryptocurrency of China. The circulation behind this movement was nothing but a political stance on blockchain networks, as well as a declaration of Chinese government’s economic dominance in the world. The United States is now facing a real threat in its political jurisdictions.
Bitcoin became an open-source software in 2009, but it was rarely attractive to any investors. To be frank, the U.S. was still recovering from the Great Recession, and many investors thought to be careful entering a new market that they’ve never heard of. However, Cryptocurrency quickly gained its public interests, and the general population started to see the benefits of cryptocurrency. One of the most widely known advantages for cryptocurrency is its transferability. During a cryptocurrency transfer, individual ownerships are established, foreign transaction fees are voided, transactions are protected, and probabilities of fraud are reduced. While it is beneficial, many people also seek this as an opportunity to initiate illegal transactions that can go under the radar. Many politicians and businessmen in China utilize cryptocurrency to transfer their wealth overseas so the government will have no way to track them down. Because of that, China banned the usage and development of cryptocurrencies in December of 2013.
This is not where the story ends. Though China made the effort to stop transactioning cryptocurrency domestically, the government and People’s Bank of China realized its importance and the future of blockchain networks. Numerous reports stated that Chinese government have since started to develop its own cryptocurrency that is not affiliated with any private sector. Its main initiative was to enter the market as a state-sponsored currency so that it can be implemented into the society easily. Many rumors were going around for the past six years, but nothing productive was recognized until 2019’s announcement.
Recently, China officially announced its developed product called Digital Yuan(DCEP) and launched an exclusive digital wallet at the same time. The government will initiate six major cities to be in trial with the wallet and 50% of the transportation welfare funds will be transferred into the wallet monthly. As China has developed mobile payment for about five years now this initiative will not add any stress to the general public mainly because everyone has been using AliPay(by Alibaba) and WeChat Pay(by Tencent) in their daily lives. The intention to develop DCEP was not only to limit the reliance that citizens have with private sectors like Alibaba and Tencent, but also something much bigger.
The current monetary world is controlled predominantly by the U.S. Treasury. Rates for any currency fluctuates because of the U.S. dollar and the U.S. controls most of the products’ market values at the moment. While Saudi Arabia, Russia and other countries have larger oil production abilities and resources than the U.S., the U.S. continues to have a powerful stance in any trade agreements because of the large portions of assumptions for petrols. This is what exactly China is trying to do, digitally. While the U.S. is busy limiting private companies like Facebook in developing their own cryptocurrency, China has now created one that can be implemented into 1.4 billions of people’s lives. Since 2014, with the help of O2O’s tremendously fast growth, QR code payments started to become universal in China, and many neighboring countries and tourists’ places around the world started to accept them as well with apps like AliPay and WeChat. With the same technology China is intended to connect O2O with blockchain networks, and achieve payments with DCEP with customized QR codes. Once achieved, because of the demand in the market by Chinese citizens, there is no doubt that other countries will quickly adapt to accepting DCEP payments. People all around the world will start to accept and adapt to this new way of transactions and cashless transactions would be widespread. The U.S. currency will no longer have the monopolistic control of the market.
What does the future hold? The U.S. needs to act quickly and realize its urgency. While the millennials — and dare I say it, the old generations — are trying to figure out what cryptocurrency actually is, China is acting quickly and already established a state-wide currency. Since blockchain experts remain in companies like Facebook, the Treasury and the rest of the officials should rather implement incentives and work with these people, instead of shutting down the idea with a fear of monopoly in the blockchain market. The sad truth is that the U.S. is already late to the game. With the struggle of COVID-19, companies and the government shifted their focuses to ways of restarting the economy. On the other hand, China has slowly recovered from the shutdown from the pandemic, and the government has already pushed initiatives for DCEP to implement in real life. The main issue is not whether the U.S. can dominate the blockchain market with state-controlled currency anymore. Rather, the rest of the world should prepare for a new era to begin, and a new blockchain world where DCEP is your next World’s Reserve Currency. If you don’t want DCEP to have the same power as the U.S. Treasury has in the current monetary market, it is now or never to act and collaborate.
I’m a BSM double major at Tulane University, focused on Marketing and Legal Studies in Business, minoring in Political Science. I’ve traveled to 34 states, lived in three countries and am particularly interested in the intersection of East Asian politics, e-commerce and the effectiveness of targeted marketing campaigns.
I am also an avid drummer, and a culinary enthusiast.