China plans to use a blockchain-based digital currency to outperform the US dollar in global dominance. The alleged transaction speed, however, causes irritation. Are we expecting an over-bitcoin?
An arms race of stablecoins awaits us as soon as the geopolitical climate warms up. China has committed to blockchain development and is accelerating its work on the planned digital currency. According to Cai Yin, a blockchain veteran from Shanghai, a “war of crypto-tokens will break out” next year.
Plans for two billion people on board
A government-sponsored digital currency will only effectively replace current payment networks if they are scalable. China’s digital currency (DCEP) wants to solve this problem – how and if it does, but is unclear.
Yang Wang, Senior Research Fellow at Renmin University of China’s Fintech Institute, says China’s DCEP has a top speed of 220,000 transactions per second (TPS). For comparison: PayPal has only 40,000 TPS, Facebook’s Libra a measly 1,000 TPS.
According to Yang, this is proof that China’s digital currency dreams are becoming reality. However, the claimed speed in practice should look different than in theory. Nonetheless, the project is ambitious.
Yang claims that in the first phase, China will be able to tie about two billion international users to its digital currency. Southeast Asia and those along the Belt and Road initiative are encouraged to use the new payment channel.
China: reducing the gap between dollar and yuan
However, China also plans to use its national coin to reduce the differences between the yuan and the US dollar.
The country already has a blockchain trading financing platform under the leadership of the People’s Bank of China. The platform has already processed $ 4.4 billion in foreign business. China hopes to use its digital currency to further reduce the differences between the yuan and the dollar.
If successful, the project is likely to destabilize global financial markets and even weaken the US dollar. Facebook has also used the threat of China as a lever to get regulators to act swiftly on its Libra plans.
Before our eyes, an arms race between state-supported Stablecoins instead – and the verdict on who will win, is still pending.