Monday, January 25, 2021

Major Chinese cities plan large-scale tests of digital currency in 2021 — Global Times

Industry observers said that these plans by China's first-tier cities send a clear signal that DCEP will be subject to large-scale testing this year against the backdrop of a global race, which will lay a solid foundation for its launch in the near future.

"The pilot testing is only the first step of a 'long march.' Once launched, the digital yuan will reshape China's financial industry and unleash a promising digital finance service sector worth billions of yuan," a Shenzhen-based veteran industry insider told the Global Times on Sunday.

In 2020, the trial operation of DCEP expanded from small-scale closed-loop testing to large-scale open testing.

The tests were carried out in a handful of cities including Shenzhen, Shanghai, Suzhou in East China's Jiangsu Province, Chengdu, capital of Southwest China's Sichuan Province, and Xiongan New Area, North China's Hebei Province.

In addition to offline payments, the digital yuan wallet also supported online payments in e-commerce platforms in trial runs....
Major Chinese cities plan large-scale tests of digital currency in 2021
Global Times

China has allocated 104 billion yuan (about 16 billion U.S. dollars) from its central budget to fund basic living allowances for needy people ahead of the upcoming Spring Festival, an official said on Monday.

Temporary assistance and subsidies will be provided directly by local authorities to those who face dire situations due to COVID-19, said Zhang Zaigang, deputy director of the social assistance department of the Ministry of Civil Affairs, at a press conference.

Zhang urged local authorities to ensure the timely distribution of subsistence funds to people ahead of the Spring Festival, the most important traditional Chinese festival, which falls on Feb. 12 this year.

Assistance should also be offered to low-income residents in the country's northern areas to help them withstand the freezing winter temperatures, Zhang said.

Over 1.8 billion yuan in heating subsidies has been distributed in northern provincial-level regions including Heilongjiang and Liaoning, figures from the ministry show.
China allocates billions for needy people ahead of major festival


Peter Pan said...

Superfluous technology. This is a sort of cargo cult.

Ralph Musgrave said...

The arrival of DCEP (also known as CBDC) will help end the aritficial privileges enjoyed by private banks under our existing fractional reserve bank system: the only reason for deposit insurance under the existing system is to provide the population with a totally safe form of money. Once CBDC arrives, there'll be no need for deposit insurance.

Plus as this tweet by George Selgin makes clear, we're well on the way to disposing of fractional reserve ANYWAY, due to the huge increase in base money now in circulation.

Peter Pan said...

I live in Canada and we don't have a fractional reserve system. There are artificial privileges for banks and naturally those will stay until the current system is reformed. What's going on here isn't reform, it's some of sort of techno fad.

Tom Hickey said...

Efficiency and security.

Peter Pan said...

So "efficient" it has its own growing carbon footprint.

Tom Hickey said...

So "efficient" it has its own growing carbon footprint.

That is from mining.

CB crypto currency is issued not mined. Blockchain is the basis of a digital ledger payments system that enables instantaneous clearing and reduces transaction time and cost.

Ralph Musgrave said...

Peter Pan: Try Googling "fractional reserve" and "Canada". If you find anything that suggests Canada DOES NOT have an FR system, let me know. I can't find anything.

Peter Pan said...

"fractional reserve banking canada" yields:

Canadian banks are part of the fractional reserve banking system. In fractional reserve banking, banks have to keep a certain amount of money (a fraction, say 10%) in the bank for every dollar they loan out. But in the 1990s, the reserve requirements in Canada were phased out and today there are none.

Peter Pan said...

You can have non blockchain DLT, but the only difference is that there wouldn't be a central administrator. Cryptocurrency wouldn't be needed in that case.

Tom Hickey said...

As I understand it, central bank digital currency is a blockchain payments system that would replace the current system for clearing. It is "crypto" in the sense that the blockchain system is secure. It is more properly termed virtual currency since it only exists virtually. But most currency today is also virtual, existing only on spreadsheets. The use of token currency (cash) is minimal in comparison.

The "crypto" means encrypted. But all virtual currency is encrypted, too.

The cb virtual currency differs by being a form of clearing, which can be blockchain or the conventional clearing through the banking system that now occurs virtually.

There are other virtual systems like Paypal, but they are used to exchange central bank currency outside the banking system. These are not blockchain.

Non-government created "munnie," broadly known as cryptocurrency, is not currency in the legal sense, since it is independent of law. Currency Law and Legal Definition. It depends on trust among parties as a convention rather than being an official state unit of account. Some jurisdictions classify it as ordinary property and tax it accordingly.

Tom Hickey said...

Another difference between cb currency and non-government cryptocurrencies is the existence of monopoly. Bitcoin has a monopoly over Bitcoin, but there are other varieties of non-government cryptocurrency in competition with it. That is not the case with cb virtual currency regardless of the type of ledger and clearing. In addition, a sovereign can regulate or ban the use of non-government crypto.

Peter Pan said...

Blockchain (and its equivalents) can authenticate distributed data. It can verify the integrity of a video file, a spreadsheet document, or a cryptocurrency. It's the last item that has become of interest to people.

Normal electronic currency is stored in ledgers, which are spreadsheets. It exists as a number. Changes to that number involve arithmetic and require a transaction. Transaction requests must be authenticated. Such a system doesn't have the computational overhead that a cryptocurrency would have.

Distributing a ledger, or any file, requires a peer-to-peer network, encryption, and authentication. This isn't new technology. Virtual money-making is a relatively new application of existing technology.

There's no point in creating a cryptocurrency if it doesn't have a useful attribute. Bitcoin grows over time, hence the opportunity to mine it. If a country creates a cryptocurrency that no one can mine, then they may as well avoid the overhead and create it as entries on a ledger. Why they would want to distribute the ledger is unclear.

Peter Pan said...

Another difference between cb currency and non-government cryptocurrencies is the existence of monopoly. Bitcoin has a monopoly over Bitcoin, but there are other varieties of non-government cryptocurrency in competition with it.

There are practical and ideological reasons for wanting to be free of government interference with regard to mediums of exchange. I'm surprised that central authorities haven't moved aggressively to crush the growth of these alternatives. Perhaps they want to get in on the action?

Tom Hickey said...

CB currency, virtual or not, and non-government "cryptocurrency" are totally different species of the genus "munnie," for all the reasons that MMT enumerates. For one thing, cb virtual currency is convertible to the unit of account at a fixed rate. In contrast, non-government crypto is volatile in cryptocurrency markets.

The only similarity between cb blockchain virtual currencies and non-government blockchain is the common property of being blockchain administered.

The purpose of non-government currencies, of whatever form, is to avoid government control. The appeal of non-government "cryptocurrency" is that is involves spot settlement like cash and is private like cash transactions, but doesn't involve anything physical. As Yves Smith aptly puts it, "prosecution futures."

Government blockchain currency increases efficiency and reduces transaction cost wrt the existing payments system, so it is a no-brainer. China, which is already mostly virtual, is leapfrogging again by going not only virtual but also blockchain. And if the digital yuan is totally administered by the PBOC, then it eliminates the middlemen. This would be tantamount to have an account at the PBOC for transactions.

Peter Pan said...

Yes, they are different. That is why it is attractive for some people. Libertarians, criminals, and tax avoiders want to be free of government dictates.

Blockchain is less efficient at processing transactions. There are better algorithms, but the most efficient method is through the existing payments system.

p.s. I've been using no fee banking for over a decade.