From DCEP To Libra, What Role for Decentralized Currencies?

RioDeFi
RioDeFi
May 7, 2020 · 3 min read

By Harrison Cheung

Almost a year ago, Facebook appeared before the US Senate Banking committee to explain the social media giant’s upcoming digital currency project called Libra. Facebook CEO Mark Zuckerberg has regularly pointed out that China’s digital payments infrastructure was more advanced than the United States. This is all the more apparent now that the PBOC is about to release the digital equivalent of the yuan called DCEP.

Facebook’s cryptocurrency project Libra

What is DECP?

DCEP (Digital Currency Electronic Payment) will operate on a two-tier system, whereby commercial banks convert their deposits in central banks into digital currency before distributing this digital currency to consumers. DCEP therefore should be conceived as an alternative to cash that is more conducive to the circulation and internationalization of RMB.

The DCEP will be distributed to seven financial institutions, including Tencent (the company behind WeChat) and Ant Financial (Alibaba’s digital payment arm).

The Chinese government will maintain close supervision over transactions involving DCEP which very much takes the opposite view of most cryptocurrencies. Users of cryptocurrencies are often concerned about financial privacy, easy movement of funds without trusted intermediaries, protection of wealth against inflation, and alternatives to centralized government-led financial systems.

China is expected to release the digital Yuan in 2020

For now, it is unclear whether DCEP will be convertible into other digital currencies. If the government allows it, DECP will compete directly with regulated stable currencies such as Libra. One may argue that DCEP’s primary goal is to counter the potential risks presented by the introduction of Libra. However, this goal is secondary to the opportunity to elevate the RMB to international currency status. Currently, the international payment system is dominated by SWIFT (Society for Worldwide Interbank Financial Telecommunication), which is not the most favourable to the Chinese yuan. China needs a new cross-border payment system to bypass SWIFT, so the concept of DCEP came into being.

China has a very large population base, and if Chinese users accept DCEP, it will lay a solid foundation for future financial services. If other countries also accept DCEP for international exchange, then its international status may well become unrivalled.

Gear your project for sustainable economic growth.

The emergence of initiatives such as Libra and the digital Chinese yuan casts a shadow on the role to be played by decentralized cryptocurrencies such as Bitcoin in the future economy.

One constant weakness of existing blockchain networks is their lack of scalability and speed when compared to traditional financial systems. Users face systemic challenges due to variable, sometimes very high transaction fees (especially for micro-actions in games) and a relatively slow network with low transaction throughput.

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Rio DeFi is creating a global ecosystem. We believe that the success of our initiative is deeply connected to the success of the projects that will build on our platform. If you build your application on Rio Chain, our team will assist you in promoting your project across our large network of crypto users, developers, and investors.

Join us in establishing the next frontier of finance!

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RioDeFi

RioDeFi accelerates the mass adoption of digital assets by bridging traditional and decentralized finance. Our vision is a world in which everyone has access to decentralized financial (DeFi) services. We develop solutions that connect banking institutions with blockchain systems

RioDeFi

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RioDeFi

The Next Frontier of Finance

RioDeFi

RioDeFi accelerates the mass adoption of digital assets by bridging traditional and decentralized finance. Our vision is a world in which everyone has access to decentralized financial (DeFi) services. We develop solutions that connect banking institutions with blockchain systems