Why China Aims to Replace Cash With the Digital Yuan - Ep.146

Martin Chorzempa, research fellow the Peterson Institute, and Dovey Wan, founding partner at Primitive Ventures, discuss China's new blockchain push and the forthcoming DCEP. They cover how the blockchain initiative is part of an effort to set global blockchain standards, how it fits into the larger U.S.-China trade war as well as the threat from Facebook's Libra, and why part of the motivation behind the DCEP may stem from the shadow banking system in China. They also talk about how the DCEP might work, why it aims to be like cash, and ways in which a successful digital currency could be used to help internationalize the renminbi, but why other countries will likely still resist becoming more dependent on China's currency. We also explore what "controlled anonymity" will look like in the DCEP, why it might actually be preferable to transacting via WeChat Pay or Alipay and whether or not Chinese people will become interested in Bitcoin due to this exposure to blockchain technology.
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Episode links:
Martin Chorzempa: https://www.piie.com/experts/senior-research-staff/martin-chorzempa
https://twitter.com/ChorzempaMartin
Dovey Wan: https://twitter.com/DoveyWan
Xi Jinping’s speech: https://www.coindesk.com/president-xi-says-china-should-seize-opportunity-to-adopt-blockchain
Cryptography law: https://www.coindesk.com/chinas-congress-passes-cryptography-law-effective-jan-1-2020
China’s 500 enterprise blockchain projects: https://www.coindesk.com/from-banking-giants-to-tech-darlings-china-reveals-over-500-enterprise-blockchain-projects
Changchun Mu, the deputy director of the payment and settlement department of the PBOC, on how DC/EP aims to replace the M0 money supply (banknotes and coins): http://www.cf40.org.cn/uploads/newsletter/20190803.pdf
Dovey’s article on how the digital yuan will affect the M0 money supply: https://www.coindesk.com/digital-renminbi-a-fiat-coin-to-make-m0-great-again
China’s already very digital economy: https://www.piie.com/blogs/realtime-economic-issues-watch/who-likes-facebooks-libra-currency-not-chinese
Reaction of Chinese dissident to China’s blockchain push: https://www.coindesk.com/bitcoin-dissident-sees-dark-warnings-in-chinas-blockchain-push
Unconfirmed interview with Alex Gladstein of the Human Rights Foundation: https://unchainedpodcast.com/why-the-digital-yuan-could-one-day-be-seen-as-a-blunder/
The commercial entities involved in helping to release the DCEP: https://www.forbes.com/sites/michaeldelcastillo/2019/08/27/alibaba-tencent-five-others-to-recieve-first-chinese-government-cryptocurrency/#95e9d351a516
How they will be involved: https://twitter.com/DoveyWan/status/1191807688570626048?s=20
”Controlled anonymity“: https://twitter.com/ChorzempaMartin/status/1162071943568338944?s=20
Problems that could arise with the DCEP: https://www.scmp.com/economy/china-economy/article/3035797/blockchain-endorsement-chinas-xi-jinping-could-lead-fraud-and
People with poor social credit banned from buying plane and train tickets: https://www.theguardian.com/world/2019/mar/01/china-bans-23m-discredited-citizens-from-buying-travel-tickets-social-credit-system
The FT on why China’s currency will not replace the USD: https://ftalphaville.ft.com/2018/09/19/1537329600000/China-s-currency-will-not-replace-the-US-dollar/
2000 speech by Bill Clinton: https://archive.nytimes.com/www.nytimes.com/library/world/asia/030900clinton-china-text.html?mcubz=2&module=inline
Change in plans to eliminate the Bitcoin mining industry: https://www.coindesk.com/sichuan-should-work-to-remain-attractive-to-crypto-mining-policy-advisor