Hugh Harsono

Opinion | How China’s digital currency could impact the country’s fintech start-ups

Beijing’s push for a sovereign digital currency was originally driven by the rapid digitisation of the economy and the rise of cryptocurrencies.

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China’s national digital currency (DCEP) Photo: Shutterstock

Hugh Harsono

Published: 6:00am, 21 Sep 2020Updated: 11:08am, 22 Sep 2020

The digital payments market in China helped revolutionise the global e-payments industry, with China playing a significant role in the initial adoption and implementation of e-payments as a whole.

The presence of Chinese-based virtual payment systems throughout the world points to the success that Chinese organisations have had in the areas of customer education, acquisition, and usage.

China’s lead in the digital payments industry is now ready for another milestone – the first state-backed digital currency: the digital yuan or Digital Currency Electronic Payment (DC/EP).

Initial reports about the digital yuan date back to 2014, indicating it has been on Beijing’s policymaking agenda for some time. As the first state-backed digital currency, it now has the chance to be a trailblazer among global cryptocurrencies.

But many analysts are asking what effects – both positive and negative – could the digital yuan have on the broader fintech ecosystem.

Late 2016 saw one of the first tests of the digital yuan, with further efforts validated through the creation of a Digital Currency Research Institute (DCRI) in mid-2017. Patent filings by the DCRI in 2018 indicated a further interest in honing the development of a digital currency and the People’s Bank of China (PBOC) purportedly led test runs of the digital yuan in late 2019.