- Analysts say DCEP development will have little impact on other crypto assets for the long-term.
- China plans to make its digital currency a centralized asset. A controlled crypto asset will keep its volatility in check.
- China’s action is encouraging more mainstream players to the blockchain and crypto industry.
China is not relenting on its efforts to launch its own digital currency, as the People’s Bank has already filed 84 patents. The Chinese apex bank has already rolled out its program for the launch of the digital currency.
Based on a Financial Times report, the 84 proposals the Bank received contain a proposal for the interbank settlements with yuan and the issuance and supply of a central bank digital currency (CBDC). The proposals also include the incorporation of digital currency wallets into the present retail bank accounts.
Although the Chinese government has not been outspoken about the development, these new patients show china’s intensified effort to speed up the roll-out process of an electronic payment system (DCEP), in order to compete favorably with other economic powers like the EU and the U.S.
Development may not have an impact on crypto assets
Nemo Qin, an analyst at eToro, stated that this recent development will not have any impact on crypto assets in the long-run. There will still be a tight control on the issuance of yuan, as there won’t be trading of existing cryptos or public mining.
DCEP will be a centralized asset
Most cryptocurrencies and digital currencies are decentralized. But China says the plan is to make DCEP a centralized digital asset. As a digital currency issued by the government, it would not have an impact on the crypto asset market.
Bitcoin, crypto’s biggest asset, rose from $7,400 to $10,300 in October last year, which is a 40% increase. The rise came soon after Chinese President Xi Jimping made a statement that China should take the full advantage cryptocurrency and blockchain technology presents
When the market overreacted to the news, prompting to the rise in the value of Bitcoin, the market soon began to relax when the crypto community started understanding the intent being China’s move. Bitcoin shelled about 37% of its value until it started bouncing back from last month.
China’s ambition encouraging more players
Many players in the mainstream sector are seriously considering an expansion into blockchain and cryptocurrency. More players have now joined the train, as the Bank of International Settlement (BiS) has already entered into discussions for possible cases of interoperable CBDCs.
Qin revealed that there are high expectations that more central banks would develop their own cryptocurrency assets through blockchain technology.
China is expected to roll out the digital yuan this year, which could dramatically transform the economy into a completely digitalized economy. According to the People’s Bank of China, the goal is to offer more digital payment options which would speed up transactions.