China's Digital Currency Revolution

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

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