China’s Digital Currency: 

Potential Impact and Investment Opportunities


Since the creation of Bitcoin, central banks around the world have contemplated digital currencies of their own. The People’s Bank of China (PBoC) began its research in 2014, involving various commercial banks and experts in the field to conduct feasibility studies on prototypes, design architectures and other elements. This research report studies the current developments of digital currencies with a specific focus on the potential impact of DCEP – China’s digital currency that went into pilot in 2020.

Highlights of the report

  • DC/EP re​​​pres​​​ents China’s proactive stance toward embracing the coming of a truly digital era. It is also a defensive measure against digital currencies issued by global corporations.

  • Participants in digital currency field include both large commercial institutions such as Facebook and government regulators such as The People's Bank of China. Their perspectives are different, and therefore, the challenges they face and the influence they make are also different.

  • It is expected that China’s DCEP to mainly replace cash in circulation and will not have a huge impact on consumer’s payment habits in the short term. The attractiveness of digital currency to merchants is much greater than consumers. Compared with cash, digital currency has greatly enhanced the easiness of use and tractability of the legal tender. At the same time, because it is not completely anonymous, every transaction can be tracked and monitored.

  • China’s DCEP could promote the internationalization of Renminbi, and it is also an opportunity to connect Renminbi-denominated assets with the world. The acceptance of DCEP will depend on the overall progress of the level of acceptance of RMB.

  • Digitization of currencies will bring about significant investment opportunities, especially in the development and adoption of blockchain technology, smart contract, and innovations in payment technology and its applications.

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