Recently, the news spread around the world that China has been developing its digital currency for five years and is preparing to launch it “just about”. This was stated by the representative of the Chinese Central Bank Mu Changchun. The new digital currency will be called CBDC. By and large, it will be the yuan on the blockchain – the national cryptocurrency of China. It will be free to buy, sell on exchanges and make money on the course using automated trading..
The new Chinese cryptocurrency is built on the blockchain. So it really will be a classic digital currency. Now, according to Mu Changchun, the architecture of the cryptocurrency is fully developed..
Compete with Libra?
The Chinese authorities do not hide that they are going to launch their digital currency before the Libra cryptocurrency from the American social network Facebook is launched. The Chinese consider the American social network token a threat to their economy. Therefore, we intend, first, to ban it on our territory. And secondly, to give Chinese citizens an analogue of Libra – CBDC digital yuan.
True, some experts doubt that a large-scale project of a national digital currency is really hidden behind the loud words of Chinese officials. No one guarantees that China’s digital currency will launch next year, not 10 years from now.
In any case, China has plans to launch it. Therefore, in this article we will try to understand what CBDC is and how to “get rich” on it..
It is not yet known exactly how the Chinese cryptocurrency CBDC will work. There is no documentation on the Internet. There are only rumors and conflicting information. China is traditionally a rather closed country to the world. Therefore, before the publication of official documents, one can only roughly describe the “nature” of the future cryptocurrency. What I will do in this article.
How you can make money on CBDC cryptocurrency
The creation of the Chinese national currency has accelerated due to the fact that Libra is on its way. To stay ahead of their American rival, the Chinese have stepped up their cryptocurrency hub.
It is already known that at the initial stage, seven institutions will be able to use the cryptocurrency yuan. Namely the following:
- largest banks in China (CCB, ICBC, BC, ABC),
- Alibaba and Tencent corporations,
- payment system Union Pay.
As the crypto-yuan consolidates in the market, the number of companies that will use it will gradually expand..
The Chinese government is going to make the national digital currency a springboard for the internationalization of the yuan. In other words, the Chinese want to replace the dollar with the yuan. Make it the currency of international trade. This is what the blockchain was for..
Once the CBDC is strengthened, ordinary people around the world can freely buy and sell it. Cryptocurrency mining will be carried out by Chinese government organizations (PBC). Therefore, ordinary citizens cannot make money on this..
It will be possible to buy digital currency
However, it will be possible to buy cryptocurrency. To do this, it will be enough to open an account on the exchange and freely earn on rate changes. It can be assumed that the digital yuan will grow at a fairly rapid pace. So you can make money on it.
The main advantage of the crypto-yuan is that it is likely to be a highly liquid means of payment. Anyway, CBDC holders will not pay interest, as is the case with deposits. And at the same time they will be spared the credit risks that arise when storing funds in commercial banks. That is why it will be possible to keep your funds profitably in CBDC. It is enough to create an electronic wallet and register. Then you can forget about investing for a long time and wait until the cryptocurrency grows in price.
Most likely, China will allow CBDCs to be traded on multiple exchanges at once. So it will be possible to earn on the difference in the cost of the digital yuan on different sites..
Of course, these are largely guesses that can be made based on the statements of Chinese officials involved in the development and promotion of CBDC. Until the digital yuan appears, you can earn using the 3commas auto trading capabilities. For this, China is not needed at all.
Main features of China’s new cryptocurrency
Digital yuan
China’s new cryptocurrency is a fairly standard digital token of the Central Bank. These will be public funds. This information was recently confirmed by the deputy head of the IICV Di Ganga. This means that ordinary citizens will be able to buy China’s new digital currency. The cryptocurrency system will most likely be centralized.
The CBDC coin can be used by both banks and international financial organizations (for example, in cross-border transactions), and individuals. New Chinese cryptocurrency can be calculated when trading securities.
The Chinese authorities want to increase control over the country’s financial system by translating the yuan into digital. The National Bank of China will be granted the right to issue.
It is assumed that the circulation of the digital yuan will take place within a 2-tier monetary system. This means that Halyk Bank will conduct transactions directly with commercial financial institutions. The withdrawal and issue will be controlled by the NBK. At the second level of this system, banks will be able to sell CBDC to everyone. This approach will allow, if desired, to replace paper yuan. At the same time, the Chinese economy will not suffer.
The two-tier monetary system and centralization hint to us that China’s new cryptocurrency will look more like regular fiat than bitcoin.
How China will use its cryptocurrency
The Chinese are already making Napoleonic plans. They want to replace paper money with digital currency. If this happens, then China will indeed make a real “financial revolution”.
The benefits of the spread of digital currency are obvious. Conventional retail payments could be greatly simplified by improving the mobility of money. Clearing between banks will also be significantly simplified.
Using the digital yuan will increase the speed of cross-border transactions and make them cheaper. In terms of transaction costs, the new crypto-yuan may be able to compete with Bitcoin. What will contribute to the internationalization of the yuan.
There are other positive aspects of introducing a digital national currency. It is no secret that a lot of resources need to be spent on servicing paper money. The spread of the digital yuan will reduce operating costs.
Also, digital currency will put an end to the possibility of money laundering. After all, it is much easier to carry cash through several financial transactions and make it legal. Money laundering will be much more difficult with digital money.
The digital currency will be more difficult to get out of the country. Many countries, including China and Russia, suffer from the withdrawal of capital to the US and the EU. The digital yuan will stop this process.
In general, as has been known for a long time, digitalization will only strengthen state control over the economy and finances. National Bank of China will be able to control finances even more closely.
The technical side of the new cryptocurrency
Digitalization of China
According to all data, including according to Binance Research, the new cryptocurrency can be used even without a bank account. Coins, like other cryptocurrencies, will be stored in digital wallets. The system will be built on the blockchain. You can manage your accounts in CBDC using both smartphones and PCs..
I already wrote above that the cryptocurrency is arranged according to the principle of a two-tier system. But it is not yet clear whether the top tier will be blockchain-based. The Chinese want to make the system centralized. So it is possible that there will be a blockchain at the lower level, but not at the upper level..
The representative of the People’s Bank Mu Changchun said at his press conference in August 2019 that the new cryptocurrency network will have very high performance. The system, he said, will be able to perform at least 300 thousand transactions per second. If the Chinese can really achieve this kind of productivity, it will be a real technological revolution. After all, developers of other cryptocurrency networks existing today cannot even dream of such a thing. Most likely, such unprecedented performance will be achieved through the use of off-chain solutions, sharding, sidechains, etc..
Smart contracts and Big date
A spokesman for the Chinese central bank has promised that the digital yuan will work with smart contracts. However, he specified that their functionality will not go beyond the “basic monetary requirements.” Big Date will be an important part of CBDC technology.
We see how the Chinese are persistently trying to cross all the significant technologies of the so-called “Fourth Technological Revolution” in their digital currency. Big Data technology will be used as a filter that will allow timely detection of money laundering processes. It won’t be easy to avoid paying taxes. As well as financing terrorist activities.
To use the new digital yuan, you will have to go through identity verification (KYC). This can hardly surprise anyone. After all, now this is the general rule of all major cryptocurrency platforms..
From the above, it can be assumed that the bank will be able to identify and instantly freeze accounts in digital yuan in real time. Those accounts that were used for suspicious transactions.
There can be no talk of any anonymity in the future Chinese cryptocurrency network. Wallets will be firmly linked to the user’s passport data.
In general, modern states have no understanding of anonymity in financial affairs. Remaining anonymous is allowed only when voting.
Possible CBDC launch dates
Crypto Yuan launch
Different publications give different dates for the official launch of the national Chinese cryptocurrency. China Daily writes that closed testing of the digital yuan has already begun. Both commercial and government organizations take part in testing.
Other media outlets report that the Chinese want to launch their cryptocurrency before Facebook has time to launch Libra. It is not yet clear who will win this race. In any case, the launch of CBDC should be expected no earlier than the second half of 2020. And, most likely, closer to its end.
It remains unclear how large Chinese corporations Alibaba, Tencent and Union Pay will participate in the new cryptocurrency system. The Global Times claims that the new cryptocurrency will initially be tested in Shenzhen. The headquarters of Tencent is located there. Apparently, the company, together with government agencies, will test the digital yuan. This is evidenced by the fact that recently an institute was opened in this place. One doing research in financial technology. More than fifty patent applications have already been filed from him. At the same time, while the exact launch date for CBDC is not known.
Who else did this?
Note that the national digital currency is far from Chinese know-how. First of all, you can remember the Petro cryptocurrency of Venezuela. However, China has overtaken many. The rest of the countries are just thinking about issuing their national cryptocurrency. In Ukraine, they still cannot launch E-hryvnia. Sweden is thinking about establishing a cryptocurrency franc. In Germany, it is generally believed that national cryptocurrencies will negatively affect the global financial system. It seems to me that China is not very concerned about the fate of the Western financial system. Therefore, he will no doubt launch his cryptocurrency..
In Russia, they have long been talking about creating a crypto-ruble. However, the implementation of this idea never started. A similar situation is observed in most countries of the world. While local governments are just exploring the possibility of introducing national cryptocurrencies, China has begun to take action.
Summing up
Digital yuan
So, China’s new digital currency may soon supplant paper money in that country. At the same time, the liquidity of the new cryptocurrency will be very high. After all, it will be provided with yuan 1: 1.
The People’s Bank of China will issue the crypto-yuan. The value of the cryptocurrency will be determined only by the confidence of the population in their government and the economy of China.
In the future, it will be possible to earn money on the new cryptocurrency. After all, the authorities will not prohibit the purchase and sale of crypto-yuan. True, it will not be possible to carry out “gray” operations with its help. Since netizens will be completely deprived of anonymity.
You don’t need to have a bank account to buy and sell digital yuan. It will be enough to start a digital wallet and go through the identification procedure.
It will be possible to earn money on currency in several ways. Including rate fluctuations using auto trading and long-term investments.
Two-tier system
The CBDC currency will be used within a 2-tier monetary system. This means that the central bank will provide digital yuan to banks. And those, in turn, will serve ordinary citizens.
China, with the help of a new digital currency, will be able to establish the yuan as a currency of international importance. Moving away from paper money in favor of CBDC will simplify planning for economic development. And collecting information about the operations of cryptocurrency owners. The data will be sent to the Central Bank in real time. The NBK will have powerful anti-money laundering tools. As well as terrorist financing and tax evasion. To do this, together with the blockchain technologies of “Big Date” and “smart” contracts will be used.
It can be noted that with the help of the digital yuan, China will take even more control of the national economy and finances. Accounts whose owners are suspected of carrying out dubious transactions will be frozen without delay.
In my opinion, CBDC will not become a real competitor to conventional digital currencies. Such as Bitcoin, Ethereum and even Libra. Most likely, the digital yuan will compete with the dollar. After all, the yuan and bitcoin (even paired with Libra) have different weight categories.
Let me remind you that messages about the start of testing the national Chinese cryptocurrency appeared two years ago:
