China to Stress Tests Its DCEP With High Volume Transactions; See If It Can Handle the Load
- Will the digital RMB be launched this year? Serious tests of the digital currency electronic system (DCEP) are currently ongoing in major cities and provinces across the country.
Chinese local news reports indicate China’s digital RMB test runs are currently ongoing in Shenzhen and Suzhou in Jiangsu province. The tests are currently limited to non-complex use cases such as retailing, catering, and topping up transport cards.
As per the detailed dossier by the Commerce Ministry in the jurisdiction, the road map for the test runs will zero in on three of the main financial and political strongholds. This will overlap with what has been dubbed ‘Yangtze River Delta economic zone’ that stretches from Shanghai to three of its adjacent provinces. Shenzhen is set to be the first to commence testing.
Once the test runs across over 28 cities in China are complete, they could then focus on scaling up the application of the digital Yuan to feature more complex use cases including education, eCommerce, and tourism. This will, however, have to be greenlighted by the PBoC.
With the new milestones achieved by the digital currency, they have opened a can of worms. They will have to bolster their financial watchdog’s capabilities to monitor and deal with Money Laundering practices. They have also anticipated processing system outages leading to a denial of services when they get overwhelmed by the transactional volumes according to the stress tests they are implementing internally.
Notably, the digital Yuan has been touted to potentially break the dominance of the dollar. If the test runs post impressive results, it might prompt other countries to unveil their digital currency assuring the sovereignty of the respective states by using their own currency.
With the digital currency fully leveraging blockchain tech, it is set to ease the financial authorities' work, as it provides meticulous book keeping capabilities for each transaction recording aspects like time, amount, location of the transaction, and the intended destination. This could be instrumental in deploying their AML and CTF mechanisms on a larger scale.
There, however, seem to be a lot of back and forth amidst the Ministry of Commerce officials. With the details of the wrangles still hazy due to the NDAs signed, it is yet to be seen how that will turn to affect the deployment of digital currency. There is speculation that the real challenge is how they will dominate the WeChat and Alipay dominated sphere, highlighting that the project is still open for feedback from the public.