DCEP: Digital Currency, 100% Digital Control. Is the CCP Bracing for Complete De-coupling with the US?
Hello, everyone! Welcome to “Inconvenient Truths by Jennifer Zeng.”
Imagine one day we live in a society with no cash or coins. People no longer need a wallet, as all your money is in digital, or electronic form, and saved on your phone. Whenever you need to pay for something, you just need to swipe your phone.
Maybe you’ll say: We are already doing that. Well, what the Chinese Communist Party, the CCP, is rolling out in China now, is very different from what we are already doing. This so-called “DCEP”, or “ Digital Currency/Electronic Payment”, which the CCP is pushing, could completely change ordinary Chinese people’s lives and become a new powerful tool for the CCP to monitor and control Chinese people. It is also regarded by some commentators as a desperate struggle of the CCP as it braces for a complete de-coupling with the US, and tries to challenge the US dollar hegemony.
Today, let’s discuss these issues one by one.
DCEP To Be Rolled Out in 28 Cities and Cover 400 Million People
On Aug. 14, CCP’s Ministry of Commerce suddenly announced a piece of explosive breaking news: a central bank digital currency pilot is going to be rolled in Shenzhen, Chengdu, Suzhou, Xiong’an, and some locations where the 2022 Winter Olympics will be held, and then expanded to 28 cities and provinces including Beijing, Shanghai, Guangzhou, and the Hong Kong Macau Greater Bay Area.
The expansion means that the coverage of the pilot testing can include a potential user base of around 400 million people, that is, 29% of China’s population.
Immediately, all kinds of officials and experts sang the praises of the digital currency pilot. Some called it "epic transformation of the RMB", some named the "digital currency pilot" and “defeating of the pandemic” as two most important strategic victories of the century for the CCP in 2020.
Many CCP puppets followed up and started to exclaim, "How amazing my country is", "internationalization of RMB", and "RMB will challenge the US dollar and replace the US dollar's hegemonic settlement position". Many people in China think that technology has changed their lives and made their “motherland” stronger.
Almost right after the announcement of this news, Chinese netizens posted photos online, showing a supermarket in Shenzhen asking people who pay with cash to register their real names and contact information.
However, amongst all the excitement and fanfare, some people started to feel very worried, as they tried to figure out what all these really mean for Chinese people, and why the CCP suddenly accelerated the testing process and expanded the testing scale.
One thing that most people agree is: This is huge, and deserves a lot of scrutinies.
What is DCEP?
First of all, what is DCEP? To put it in simple language, it is the digital currency issued by China’s central bank to replace paper money and coins that are in circulation now.
It works like this:
The central bank issues digital currency to commercial banks; commercial banks release it to customers. Individuals put it inside their digital wallet on their phone. This digital wallet is actually an app. Then people can use the digital currency to make payments or save it into their bank accounts.
Right now when people use their phones to pay, they do it via a third party. In China, it’s usually Alipay or WeChat Pay. And the money they use is what they have in their bank accounts connected with their Alipay or WeChat Pay, or their balances within Alipay or WeChat Pay.
However, the digital currency issued by China’s Central Bank is directly in your digital wallet, you can use it without the internet. The process of payment can be done just by touching your phone with another person’s phone.
According to the CCP’s Central Bank, the digital currency is China’s sovereign fiat currency, nobody can refuse to use or accept it.
In the meantime, Chen Sijin, a consultant for the CCP’s mouthpiece China Central TV, says that according to a central bank director's conference, the digital currency cannot be used to exchange gold or foreign currency.
The Benefits of DCEP
According to the CCP, the benefits of DCEP include:
Convenience. It will not take up any space, and it won’t wear out or get damaged.
Offline function. A simple touch of two phones can get the transaction done, without an internet connection.
3. Security. According to the CCP, the DCEP has the national credit as its guarantee and is therefore very safe.
4. Anti-counterfeiting, anti-theft, environmental protection, etc.
5. According to the CCP, digital currency is “anonymous” but “controllable”. We will discuss this one later.
How is the CCP’s DCEP Different from Other Digital Currencies Such As Bitcoin?
How is the CCP’s DCEP different from other digital currencies such as Bitcoin?
Perhaps the biggest difference is, DCEP is issued by the CCP, or you can say, by the government, and it is a centralized currency. This feature is just the opposite of that of Bitcoin, which is decentralized. The DCEP will be the world’s first sovereign digital currency.
Another important difference is, there is a cap on the total amount of bitcoins that can be issued so that there is not an issue of currency devaluation or inflation problems connected to Bitcoin.
But for the DCEP, because it is issued by the CCP’s Central Bank, there is no limit as to how much it can be issued.
When there is virtually no cost to issue digital currency for the CCP, and the public has no way to know how much has been issued, it is very easy for the CCP to use inflation to take away people’s wealth.
A third difference is, DCEP is backed up by the state power, and everyone has to use it; whilst Bitcoin is just one of many forms of different currencies people can choose to use or not to use.
Why Does the CCP Accelerate the Rolling Out of DCEP?
When the CCP announced the testing of digital yuan in April, it said it was just a “closed test”, and was only limited in four cities and the 2022 Winter Olympics venues. At that stage, people thought it would take years to conduct the testing.
However, just several months later, the CCP suddenly announced the acceleration and expansion of the DCEP testing. This has shocked many people, and they started to try to find out why.
And below are some of the consumptions of the CCP’s motivations:
To compete with other digital currencies such as Facebook’s Libra, Bitcoin, and some other cross-border digital currencies in western countries.
To take over the market share of mobile third-party payment.
According to iResearch, the volume of mobile third-party payment in China in the 4th quarter of last year is as high as 59.8 Trillion yuan, or 8.65 Trillion US dollars; while the market share of Alipay and Tenpay are 55.1% and 38.9%.
After digitizing the yuan, the CCP’s state-owned banks don’t have to face the pressure of Alipay and Tenpay that much.
3.. To reduce the risks of bank runs. In recent years, we often saw reports about bank runs across China. After digitizing the currency, bank runs will not happen again, as everybody’s money is already in digital form, and there is no point for people to try to go to the banks to cash out their money in panic. So the CCP doesn’t have to worry that small local banks might be run into bankruptcy.
4. To brace for complete “de-coupling” with the US, and to tackle financial sanctions of the US.
Since the COVID19 pandemic, the relationship between the US and the CCP has been deteriorating very rapidly. The recent sanctions imposed on 11 Hong Kong officials really hurt the CCP and made them realize how powerful the financial sanctions can be. Even CCP’s own banks dare not to provide services to those 11 officials, and Hong Kong’s Chief Executive Carrie Lam openly admitted that she already had problems with her credit cards, which means her credit cards might have been canceled by the banks.
So the CCP realized if they cannot break away from the US dollar clearing and settlement system, they will always be restrained by it.
However, if they can set up a digital currency system of their own, and can have the international world accept it, they may be able to “bypass” the SWIFT system, which is totally controlled by the US, and to do international trade independently.
“Breaking the US financial embargo” and “the internationalization of the RMB” have been the CCP’s dreams for years. The recent sanctions have given them more motivation.
5. To Impose Tighter Control Over the Public
Although the CCP claims that the digital currency has the nature of anonymity, it is actually NOT the case.
According to the CCP’s own introduction, there are three “centers” in the DCEP system: Registration Center, Identity Verification Center, and Big Data Center.
The Registration Center is to register all the transactions, and the transactions are registered anonymously.
However, the CCP says, “as a fully anonymous and untraceable means of authentication does not meet the practical needs of anti-money laundering, anti-fraud and KYC(Know Your Customer)”, so the “Identity Verification Center” is adopting a real-name management system.
And the Big Data Center aggregates some of the data from the Registration Center and the Identity Verification Center to achieve the function of “risk control, anti-money laundering, anti-fraud, and other monitoring purposes.”
Did you get the idea? Although the CCP claims that the Registration Center and the Identity Verification Center are managed separately, don’t they all belong to the CCP? And isn’t the Big Data Center taking data from both the other two centers and “aggregating” them?
So, the actual scenario could be, the CCP knows how every penny of everyone is spent. With their sophisticated big data technology, this is not a big deal at all.
Let me give you a real example.
Several months ago, when somebody in China was making a phone call on a bus, the local CDC wanted to reach him over the phone as well. As his line was busy, the CDC official’s call couldn’t get through. What do you think they can do under such a circumstance?
Maybe you will say, just wait for a few minutes until that guy finishes his call.
No, the CDC officials are not that patient.
They immediately used the surveillance camera inside the bus, identified the person sitting next to the guy who was still talking over his phone, and then found out that person’s phone number, and then called that person, and asked him to tell the other person to hang up his phone so that the CDC official could reach him.
The person was so shocked and later on shared this story on social media. What shocked him more was that the other person sitting next to him didn’t buy his bus ticket with his credit card and that he just boarded the bus halfway and paid the ticket with cash.
So that is how advanced the CCP’s surveillance and big data system are. They could identify a “nobody” on a bus in just a few minutes, and just to make a phone call quickly!
So, would you still believe that if you are spending every penny from your phone, which is registered with your real name anyway, will all your transactions be kept anonymous？
6. To prepare for a planned economy and “internal circulation”
As I have discussed in my last show about China’s looming food crisis, with more and more countries are moving their supply chains out of China, Xi Jinping recently started to talk about “Internal Circulation” of economy, “stopping food waste”, etc; and people are worrying that some kind of food or other rationings could be adopted again.
If this is really the case, with digital currency, it will be very easy to achieve the purpose. The CCP no longer needs to print paper vouchers for everything like before. Through your digital wallet, it is very easy to control how much of certain goods you can buy. After you’ve used up your quota, it is very easy to stop you from buying more by imposing a quota on your wallet.
7. To Wipe out the Inflation, to Control the Devaluation of RMB
Right now it is not sure whether the CCP will take back the same amount of paper money when they issue the digital currency. If they do, will they limit how much paper money each person can exchange for the digital currency? If some people have more paper money than the limitation, what can they do?
If the CCP doesn’t take back paper money, this digital currency will be a new currency. It can be used to wipe out CCP’s previous man-made inflation problems, as well as people’s hard-earned savings. It can also control the devaluation of RMB if one day RMB is no longer pegged to the U.S. dollar.
As a matter of fact, it is very risky for the CCP to push for the digital currency.
Let's say, once the digital currency fully replaces the paper money, if someday, somebody or some country decides to wage war against the CCP, and attacks the computer systems of CCP’s banks with electromagnetic pulse (EMP) technology, all records of digital currency issuance, transactions, transfers, and payments may be wiped out all at once, even including the electromagnetic backup records, because it is impossible for the CCP to make a hard copy as a backup, or do backups with any other non-electromagnetic means.
So why does the CCP push for the risky digital currency so hurriedly? It must be that they feel the risk of not doing so is even higher.
That’s all for today. Truth, no matter how inconvenient it is, does save lives. Please subscribe to my channel, share it with your friends and family, and check out my other videos.
Thank you. See you next time!
8/21/2020
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