China’s Digital Currency and Blockchain Network: Is It A Unified Effort, Or A Disparate Collection of Projects?

Apparently, China is developing two projects intending to digitize key parts of its economy. If successful, this may have further implications beyond its borders. Often convoluted, the Digital Yuan, better known as e-CNY and the BSN is district technology and its success is unpredictable. However, experts say that these two projects can work together to create a more effective and efficient alternative energy source in the future.

What is the Digital Yuan, or e-CNY? 

China is striving to become the first major economy to introduce a central bank digital currency, known as e-CNY, which can be exchanged electronically at par with traditional physical banknotes. With the Digital Yuan, China is attempting to accomplish three goals:

  • To grasp the wealth of its growing middle class, which values financial inclusivity and convenience.
  • To standardize transactions across all sectors of its economy by giving its government a greater degree of control over the flow of funds between banks.
  • To push forward blockchain technology—a rapidly growing area of research that allows parties to conduct secure transactions without intermediaries such as banks or credit card companies.

What is the BSN?

The BSN is an evolving, open-source network that enables small and medium-sized enterprises to deploy a wide range of blockchain applications. The BSN is a global framework that provides a variety of services including financial services, supply chain and logistics, government services and more.

The BSN system is a deeply ambitious effort to create a decentralised infrastructure for blockchain, which could become the backbone of the future internet. The Chinese government has assessed that blockchain technology will be at the heart of the digital transformation in China, and around the world.

Is e-CNY Blockchain Technology?

No, e-CNY is not built on blockchain technology. It’s just a digital version of China’s official currency, the Renminbi. The e-CNY is issued by the People’s Bank of China and is backed by the same assets as physical currency. However, it’s different from cryptocurrencies like Bitcoin and Ethereum because those are built on decentralised blockchain networks. The e-CNY, on the other hand, operates on a centralised platform and is subject to government regulations.

The BSN and e-CNY are important steps toward advancing China’s blockchain ambitions. The potential of blockchain to accelerate trade between countries, lower transaction costs, and improve efficiency will likely make it increasingly attractive to more nations.

What is the Connection Between the Two Projects?

Although the projects are distinct, some analysts see the e-CNY and the BSN as complementary. The BSN is designed to facilitate interbank payments while keeping transactions private and secure—much like PayPal or Venmo do today. The e-CNY would allow individuals to transfer money directly between their bank accounts without going through banks or third parties. This makes it easier for individuals to trade with each other without having to go through banks at all.

To sum up, the situation with digital currency and blockchain technology in China is not straightforward. While there is a push for digitalisation and adoption of blockchain, the different initiatives don’t seem to have a unified goal or approach. The government is leading the charge with the e-CNY, while other blockchain projects are being driven by private companies.

It’s still uncertain how all these different projects will come together to form a seamless digital currency and blockchain system in China. However, with China being such a huge market, what happens there will definitely have a major impact on the rest of the world suggesting that the BSN’s creation may be related to China’s efforts to promote the global use of central bank digital currencies.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.