In the past year, China’s government has pressed ahead with plans for its central bank digital currency (CBDC), the Digital Currency Electronic Payment (DCEP) system, also known as the “digital yuan”. It’s launched large-scale tests at major banks, airdropped $1.5 million worth of DCEP to citizens in Shenzhen, and examined more than 6,700 use cases for the digital currency.
It’s been billed as the country’s most ambitious financial technology solution to date, with some suggesting that it could help China dethrone the US Dollar as the world’s reserve currency—a prospect that’s even seen the US Senate sit up and take notice.
For advocates of cryptocurrencies like Bitcoin, the rise of central bank digital currencies like the DCEP is a mixed blessing. On the one hand, it’s a ringing endorsement of the concept of digital currencies, and mainstream adoption of CBDCs could help to propel wider adoption of crypto. On the other, the centralized nature of CBDCs runs completely counter to the decentralized ethos of cryptocurrencies such as Bitcoin.