China warning: Beijing’s plan to abolish cash will help Xi Jinping ‘take control of money’

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Meanwhile financial analysts have suggested the dramatic development could enable China’s currency to challenge the dollar in the future – but could also be used a “spying mechanism” by the authoritarian regime. The Chinese government believes their digital currency, previously known as the Digital Currency Electronic Payments (DCEP), will enable it to maintain control over the domestic financial system, the South China Post reported last week.

Professor Steve Tsang, the director of the China Institute at the School of Oriental and African Studies in London, told “The success of both Ant (Alipay) and Tencent (WeChat Pay) no doubt got the Chinese Government keen to get into electronic payment and push further to e-currency.

“Why would it not want to do so when it can see the enormous potential of what Ant and Tencent have managed to do?”

Prof Tsang added: “Perhaps even more important is the fact that if the e-currency takes off, it will enable the Chinese party-state to regain nearly full control of money movement, particularly if e-currency eventually replaces hard currency.

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“It will make it much more difficult for corrupt to hide ill-gotten gains and for individuals to move money overseas bypassing government control.

“The Communist Party is about maintaining control, and whether it is about political or financial control, it will tighten its grip if it can.

“It thus makes sense for the CCP to act proactively in seeking to launch a currency.”

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Keld van Schreven, Managing Director and Co-Founder of digital asset venture capital firm KR1 plc, told “America and Silicon Valley have dominated the digital landscape until now.

“Unquestionably China has started to innovate and lead with digital services such as TikTok and had the first digital payments systems at scale such as AliPay so a Central Bank Digital Currency is a natural extension by the PBOC.”

He explained: “Launching the digital Yuan quickly and to scale is making the world wake up to digital currencies.

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“The digital Yuan, if adopted by other Asian countries, could then challenge the dominance of the dollar quite quickly.”

Digital currencies such as Bitcoin and Ethereum, with their blockchain technology are already well established, Mr van Schreven said.

He added: “The digital yuan versus Bitcoin or Ethereum is a complete non-starter as those networks are fully decentralised and already transacting trillions of dollars of economic value

“The digital Yuan is fully controlled by an authoritarian government with a history of human rights abuse.

“The digital Yuan may just be seen as a spying mechanism, so comparing it with the existing established digital crypto-assets such as Bitcoin is like comparing apples to oranges.”

Steve Ehrlich, Founder and CEO of crypto-asset investment platform Voyager Digital told “Whilst the emergence of Central Bank Digital Currencies (CBDC) is a move that has evolved as a result of the emergence of decentralised digital currencies like Bitcoin, they are very different beasts.

“Chinese citizens tend to comply a great deal more to government policy and adoption of their digital yuan is likely to be swift and widespread.

“As international use of the digital version of the yuan increases, we could be seeing the start of a true challenge to the US dollar as the world reserve currency.”

He said: “Whilst CBDCs and cryptocurrencies are different in their design, as is the technology underpinning them, we believe that with more than just the People’s Bank of China moving towards the digitalisation of their currency, in the form of the BOE and ECB, this innovation will be supportive for the digital asset space as a whole.”

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