In Search of The Perfect Coin: China’s Approach towards Cryptocurrency and Its Own Central Bank Digital Currency

Abstract

Ever since Bitcoin was introduced in 2008, Central Banks and regulators have watched carefully and cautiously over the development of cryptocurrencies. This development took a significant leap in 2019 when Facebook and the People’s Bank of China almost simultaneously announced their Libra project and Digital Currency Electronic Payment (DCEP) respectively, instantaneously creating a rivalry. This paper anchors on China’s DCEP, examines its potential benefits and risks to monetary policies, transaction security, and customer protection, in comparison with conventional fiat currency and privately issued cryptocurrencies. The structural design of the DCEP is also reviewed to understand how these features guard against the issues identified. Overall, while making a few recommendations on constructing a fully prepared legal framework, this paper recognizes the DCEP as a promising step forward as it combines the security offered by blockchain and cryptography technology and the stability supported by the Central Bank.

Keywords: Central Bank Digital Currency, China's DCEP, cryptocurrency, legal and regulatory issues