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Beijing will come out of the coronavirus crisis with a big first-mover advantage in its official digital currency. It isn’t a coincidence that China’s project picked up speed last year as Facebook announced Libra suggesting there’s also a power play at work.
Thanks to Alipay and WeChat Pay, 80% of Chinese smartphone users whip out their mobiles to make payments, more than anywhere in the world. To them, the DCEP wallets being provided by the big four state banks should seem much the same. But there are differences. In this new system, a low-value transaction can go through even if both parties are offline. Also, this is sovereign liability, safe if an intermediary goes bankrupt. The big four lenders — and later fintech firms — will distribute the tokens, but the funds won’t reside in bank accounts. This will be unlike existing payment apps that only move one institution’s IOUs to another.
