China’s national digital currency, formally known as the Digital Currency Electronic Payment (DCEP) will not seek to replace globally accepted fiat currencies like the dollar and the euro, said Zhou Xiaochuan, the former Governor of the People’s Bank of China. Zhou’s words were reported in the South China Morning Post.
“If you are willing to use it, the yuan can be used for trade and investment,” he said, speaking at the Shanghai Financial Forum. “But, we are not like Libra, and we don’t have an ambition to replace existing currencies.”
However, the South China Morning Post reported that the country’s digital currency could act as a boon to cross-border trading with China and could “promote the yuan as an international currency.”
DCEP “Brings New Possibilities for Interconnection”
Indeed, Zhou said that “if the currency exchange is realized at the moment of a retail transaction, and there is oversight of that exchange … it brings new possibilities for interconnection…the problem of cross-border remittances is easily resolved.”
Moreover, Zhou said that rather than challenging the regulatory frameworks of the foreign exchange and monetary worlds, China would instead focus its efforts on gradually persuading consumers and overseas merchants to accept digitally yuan payments.
“Some countries are worried about the internationalization of yuan,” Zhou said. “We can’t push them on sensitive issues, and we can’t impose our will. We must avoid the perception of great power chauvinism.”
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This approach stands in contrast to Diem’s (formerly Libra’s) approach to entering the world of international currency: Diem took the ‘move fast and break things’ approach that Facebook is famous for; China’s DCEP appears to be aiming for a softer touch.
DCEP Won’t Be Implemented for Widespread Use Until at Least 2023, Analysts Say
China’s DCEP has gone through two test programs in recent months, including one that was initiated in the city of Suzhou on Friday evening.
Finance Magnates previously reported that residents of China sent 20,000 transactions through e-commerce platform JD.com within the first 24 hours of a trial of the country’s digital yuan in the city of Suzhou.
Additionally, in October of this year, the city of Shenzhen issued 50,000 ‘digital red packets’ containing 200 yuan each during a one-week-long trial. As a result, 47,000 customers in the region spent 8.8 million digital yuan over seven days.
Still, it may be some time before the DCEP is used by the whole country. WeChat’s Cao Yin, who serves as the Managing Director of the Shanghai-based Digital Renaissance Foundation, told the Global Times that the digital currency may not be used on a massive scale until around 2023.