Forget Libra: China’s DCEP is Set to Bank the Unbanked

The recent news surrounding China’s official entrance into the digital central bank race has been overwhelmingly bullish and bearish at the same time. By planning and building an infrastructure for mass digital payments, online or off, China has at once provided a solution for millions of unbanked people and created a way to tighten its grip on its citizens. While they are beating out other first world innovators with their recent DCEP announcement, China’s direction can only be viewed as Orwellian.

The announcement that China would be testing out its Digital Currency Electronic Payment system (DCEP) was something we expected. For the past five to six years, the country has been developing blockchain technologies. Several of China’s biggest banks have previously gone public with their foray into blockchain research and development. 

Very soon, we’re now told, the DCEP digital currency will be tested out by banks associated with China’s central bank (the People’s Bank of China, or PBoC).

What does this have to do with Facebook’s Libra?

At a six-hour congressional hearing on the Libra project in October, Mark Zuckerberg was grilled about Facebook’s past data breaches, lack of trustability and the ramifications relating to the Libra project. One of the main goals in developing Libra, according to Zuckerberg, is to bank the unbanked.

However, the claim largely rang hollow with members of the Financial Services Committee. They chose to focus on generally tearing down what they viewed as Zuckerberg’s attempts to gain more ad dollars and disrupt American economic dominance.

DCEP Banking the Unbanked

But by looking deeper into the Libra project, you can see some potential for it to become, in effect, a central bank.

Here’s some of the reasoning behind that idea:

  • The Libra Association, which will run the Libra cryptocurrency, is a non-profit entity out of Geneva. So far, there are 21 members signed on to help run the Libra project. Each was initially set to pledge $10 million to act as a node on the Libra Blockchain. The intent of the project is to gradually become more decentralized and autonomous, features that are inherent with bitcoin
  • Intermediary banks and payment processing centers might not be needed anymore in such an environment. If Libra could be built as intended (the end result would likely look far different than the original plan), such a shift would be seismic to governments like the US and China. The main reason being, it takes currency control out of the hands of government officials, transferring it into the hands of private corporations. 
  • This is the first, but most likely not the last, instance of big tech edging into the world of banking. With blockchain technology, the ideas of decentralization and peer to peer payments (which need no 3rd parties) threaten America’s firm control of global economic policy. Europe and China have both ramped up their efforts on payment technologies and blockchain in light of the Libra project.
  • The Libra Association would be tasked with adding more currency into this type of financial system, and not the Federal Reserve or central banks. By operating as a de facto central bank, and having potential locations all over the globe, a successful Libra project could have a tremendous effect on the way the world economy works. But it’s also a complete unknown and there is no one who is sure how it will turn out.

Libra and China both plan to bank the unbanked

Part of the mission of the Libra project is to “Bank the Unbanked”. Their plan to offer financial inclusion to anyone in the world with a cell phone is certainly a worthy undertaking. And who better to get it done than a company raking in cumulatively more billions each quarter in advertising revenue? The same one that has a layers-deep team of lawyers.

But the truth of the matter is the American government has thus far been against the Libra project. It appears ready to make it very difficult and costly to ever get it off the ground. Even if they do succeed, Libra is already facing potential bans in Europe, in addition to competition from the Chinese. China, on the other hand, has zero regulatory obstacles.

Zuckerberg attended the hearing to give his testimony on the Libra project and answer questions from US politicians. Unfortunately, too much time was spent by him listening to the Financial Committee’s uninformed and often wildly irrelevant criticisms. 

What is DCEP?

Meanwhile, China, who has lately been embroiled with trade battles with the US, is preparing what looks like a clean break from a US-dominated global economy. They announced a full-scale program to intensify efforts to develop blockchain technology. At the same time, they revealed official plans to create a (faux) cryptocurrency on centralization steroids. The Digital Currency Electronic Payment (DCEP) financial vehicle is at the crux of how they plan to rebuild a world economy. 

Is DCEP a cryptocurrency?

The DPEC system is digital, will enable peer-to-peer payments, and no doubt will use cryptography. The digital currency they are proposing would also be pegged 1:1 to the RMB. But it’s not a cryptocurrency in the classical sense for many reasons, including:

While it’s obviously not a cryptocurrency, DCEP does have very unique features that directly address China’s unbanked population. In fact, this country has more unbanked citizens than any other nation. About 225 million adults lack basic financial services. These two features make DCEP into something we’ve never seen before:

  1. DCEP will enable options to pay peer to peer, without an internet connection. This is one of the ways in which China is trying to remove unsurveilled cash, replacing it with a digital currency that’s almost as mobile as cash. Unbanked populations across China, who may have limited access to the internet, will be able to participate in this new financial system.
  2. Said mobile devices do not need to be hooked up to a bank account. So a bank account would not be necessary to have financial services. Instead, it looks like China will use the banks as an infrastructure for supplying the population with money.

How does China stand to benefit?

  • For one, they will have more people to surveil. The unbanked will not only now have financial services, but they’ll also gain a new watchful eye over their transactions as well as social score tracking.
  • Efficiency and cost savings should be realized by centralizing all banking functions.
  • All financial data from its citizens will be centralized in one place and centrally controlled by the Chinese government. Officials say that this data will help them plan and manage the future Chinese and global economy.
  • If the peer to peer capabilities were to cross borders, Chinese surveillance could ramp up its global aspirations.

“The significance of Digital Currency Electronic Payment lies in that it’s not the digitization of existing currency, but the replacement of Reserve Money (M0). It greatly reduces the dependence of the trading process on accounts, which is conducive to the circulation and internationalization of the Renminbi.”  –  Huang Qifan, vice chairman of the China International Economic Exchange Center (translation)

China’s DCEP marketing strategy

Like previous initiatives in China’s long history, their blockchain movement is ambitious and it has the Chinese government behind it 100%. Every citizen will be compelled to adhere to this paradigm shift to cashless money. To reinforce the importance of everyone accepting and working towards this initiative, the Chinese government reiterated their sentiments across a wide range of outlets, including:

  • Brand new course offerings on blockchain technology, available on China’s most downloaded app.
  • China just published a new cryptocurrency index that favored Asian based coins and ranked bitcoin at #11.
  • They’ve also banned any negative speech or content about blockchain technology. They plan to use this tech in multiple industries to cut costs and improve efficiencies, such as with food management.
  • Also rolled out was a way to nail down continued Party loyalty. The Chinese government launched an app for people to pledge their loyalty permanently on a blockchain. It’s awkwardly translated as the “Chain on Aspirations.” 

If you happen to be a member of the Communist Party and find yourself forgetting why you joined in the first place, China is now keeping a permanent reminder on a blockchain. – Abacus

With the DCEP, China is essentially selling the idea of creating a central bank cryptocurrency. Only without the cryptocurrency and adding loads of blockchain to maintain a forward, leading edge appearance. 

DCEP Banking the Unbanked


According to an intriguing article from called, What Could China Gain from a Digital Yuan”, there are a number of other ways that China could manipulate the new digital currency:

  • They could reduce or increase the amount of money in wallets en masse.
  • It could be possible to restrict access to money for political dissidents.
  • Since everything would ultimately go through the central bank, decisions about everything from loan approvals to anti-money laundering efforts would be tightly controlled.
  • The Chinese Government will have complete control over the supply and demand of this digital Yuan.

Conclusion – Bearish or Bullish?

While some saw this as grim news for the free world and bitcoin enthusiasts, other people saw it as a reason to rejoice. The official admission that blockchain technology was the future according to China’s leaders gave a boost to cryptocurrency prices in general. Additionally, those cryptos that originated in China and had to relocate due to China’s previous ban all saw a jump. Even a few futures products on some of these coins launched just days after the DCEP announcement. 

But others were shocked and dismayed that such a controlling force would be leading in this technology. Because many people believe that open, public, uncensorable and immutable blockchains are the financial technology of the future.

A closed financial system that is strictly regulated by the government is a far cry from what Libra intends. And it certainly is almost the opposite of what bitcoin encompasses

What China seems to be doing is springboarding off the hype engendered by the bitcoin, crypto and the defi movement. By doing so they’re attempting a leadership initiative in a new, critical industry: modern, digitized money. And their take on it is a central bank-issued Franken-coin: DCEP.

Final note: A few instances of a fake DCEP coin listed for trading on obscure exchanges were already noticed. In fact, the real DCEP is set to test first through the central banks. At a later stage, they’ll test it out in retail banks before being distributed to the Chinese people. But, do be careful out there

Ending thought: It’s very hard to imagine a Chinese currency that lives on an immutable blockchain.

Special thanks to Dovey Wan and Michael at Boxmining for their insightful takes on the Chinese news regarding the DCEP.