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All you need to know about China's new digital currency - Part. 1

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Written by   42
2 months ago

I am pretty sure that you have heard that China wants to launch its digital currency. In this new mini-series, which I believe will be made of four parts, I will explain what it is and everything that is related to it.

We all saw in the last few months and weeks headlines such as:

"More than 19 billion dollars to its market cap"

"PayPal, green lights the use of crypto as a form of payment"

"Bitcoin reaches records highs"

"The rise of digital payments anywhere due to COVID"

"Now it looks like PPOs China Interbank is the first one to issue a digital currency"

"The largest Initial Public Offering of all time"

The nature of money, something the average person living a thousand, a hundred and maybe even ten years ago, spend very little time thinking about it. Other than a few major economic crashes, money was a relatively constant and predictable thing in our lives. But in the last decade or so, the very nature of it has started to change. With digital payments, mobile wallets, crypto-currencies and most recently the first ever attempt of a real digital currency by a major economy. The Chinese government started rolling out its digital Yuan, officially called the DCEP or the Digital Currency Electronic Payment, in small pilot projects last year.

China started to talk about its own digital currency in 2013 for the first time. The same year, WeChat, the country's most popular messaging and social app, launched its mobile wallet, following in the footsteps of Alibaba's Alipay and four years after Bitcoin was launched. At first thing, new digital currency seemed like little more than a side project of the government going to a couple of years of relatively slow research and development phase, but their focus started intensifying dramatically around 2017, leading to the first public trials in 2020, spending four Chinese cities and hundreds of merchants.

And the timing of this increased interest is no coincidence. At the end of 2017, Bitcoin hit its first real peak in valuation, creating widespread awareness for crypto-currencies around the world. In 2018, Facebook announced Libra, with bold ambitions to create a cross-border currency for its over 2 billion users. During these years, mobile wallets exploded and popularity in China on money lending through companies like Ant Financial ballooned to huge proportions in the country and the United States government launched its trade war with China, which increased the risk of financial sanctions.

Within the span of just a few years, the entire Chinese monetary system including its currency and its judicial banking sector, started facing major threats, from both inside and outside of the country.

Domestically, Tencent and Alibaba, China's two largest tech companies, started to gobble up the entire finance industry of the country. Their respective mobile wallets came to dominate the category and mobile payments skyrocketed in popularity to mind blowing 32,7% of all sales in the country, leading to many merchants simply stopping to accept other payment methods, including cash or credit cards completely.

Given their incredibly growth, the two are now on a path to spool up almost all payments in the country within just a few years and these two giants were increasingly starting to strike decisively deals with more and more merchants. This meant that consumers, even now, often have no choice but to use their services. Not only that, most giants and Alipay's parent, Ant group especially, also got heavily involved in offering other financial services, like loans or insurances on the backs of their wallets.

It makes sense. The Ant group for example, has an incredibly detailed picture of its users, including how they make and spend money, both online and offline, what merchants they shop at, and if they shop over Alibaba's ecommerce stores or their vast network of offline supermarkets, even the actual products they buy: like what they eat, the size of the clothes they wear, what medication they buy or take etc. So, it can decide on things such credit worthiness and interest rate, better than any traditional financial institution could it ever hoped to to. If you started paying for a membership gym this year, maybe your health insurance should get cheaper. Didn't pay your last month phone and electricity bills on time, well maybe the interest rate on your loan needs to be adjusted. You get the picture!

I think this should be enough for now and I will continue tomorrow with the next part.

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Written by   42
2 months ago
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Comments

Good job

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2 months ago

thanks for reading. Today, I will post the 2nd part.

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2 months ago

What is this?

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2 months ago

So it seems that by using their services, we don't have any privacy anymore?

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2 months ago

In China, there is no privacy anymore 🙂🙂

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2 months ago

Oh, China is really scary 😶

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2 months ago

It is very scary. Try and read about their monitoring measures during the pandemic and you'll understand that there is no free movement.

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2 months ago

Yeah, they are a communist country right?

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2 months ago

Yes. Communism is blossoming there.

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2 months ago

That's communism, they will control everything.

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2 months ago

That's communism, they will control everything.

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2 months ago

It's a type of regime. That's not the main characteristic anyway. But yes in China everything is monitored.

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2 months ago

How many episodes?

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2 months ago

4 my friend. I wanted to do a longer one, but ai don't have enought time today.

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2 months ago

No worries... I will wait for them

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2 months ago

Oki doki. Thanks for reading this one though.

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2 months ago