- China's central bank plans
to replace its cash with an alternative,
a digital version of its national currency.
Think of it like cash but only on your phone,
a cryptocurrency that's issued
by the People's Bank of China
and backed by the renminbi.
- [Narrator] A new global currency.
- After Facebook announced
the launch of its own cryptocurrency,
the central bank accelerated its work.
China is already well on its way
to becoming a cashless society.
Over 600 million Chinese, almost half the country,
already use apps such as Alibaba's Alipay
and Tencent's WeChat to pay for everything
from groceries to bike rentals.
Today the two companies handle close to 90%
of China's third party mobile payments market.
The central bank's currency will provide
a new payment tool to substitute cash.
Unlike Alipay or WeChat, users won't be limited
to paying within one platform.
China plans for its crypto to be accepted
by any individual or institution,
just like banknotes and coins.
If Beijing's plan materialize,
China could become the first major nation
to go completely cash-free and that could reverberate
across the global financial system.
- If it succeed, I would expect that a large number
of other countries will want to emulate their success.
- There is still known about how the system,
known as Digital Currency Electronic Payments or DCEP
will operate and what it will look like.
So we examined official statements and documents
to understand why China is pushing hard
into this crypto future.
This is Mu Changchun.
He oversees the central bank's digital currency efforts
and is the country's most outspoken
authority on the rollout.
Since August, he has given a number
of speeches on China's digital yuan,
and even launched an online course about Facebook's Libra
on a popular Chinese education app.
(man speaks in foreign language)
Facebook's plans to provide its two billion users
with a brand new digital currency
spooked central banks around the world, including China's.
- They see that Libra could be a way
of extending American financial hegemony
into the digital currency space as well,
say, helping to implement sanctions and export controls.
Beijing historically sought decentralized
digital currencies like Bitcoin
as a threat to a long standing pillar
of its monetary policy capital control.
But then in October, Chinese president Xi Jinping
spoke about the important role of blockchain,
endorsing the government's embrace
of the technology that powers cryptocurrencies.
- They're looking at this and saying,
is there some element of it that we'd like.
And actually, what they found is that blockchain
is an excellent technology for tracking.
- That could give an unprecedented level of power
for any central bank in the world over capital movements.
Officials say the digital currency
will not challenge Alipay and WeChat,
but it would have some similarities.
Like WeChat and Alipay, it will need a digital wallet.
But unlike the paying platforms,
it won't require a bank account.
Instead, commercial banks will issue the digital wallets.
A unique aspect of China's crypto
will be that payments can be conducted offline.
So in case of a natural disaster
when the network is down or if you're onboard a plane,
you can still pay as long as your phone has power.
And authorities promise a major difference
will be greater anonymity,
but it won't be absolute anonymity.
This patent filed by the central bank in 2017
shows that it's researched ways to track digital cash.
Marketers won't know what people spend their money on
but that information will still be visible
to the central bank to a certain extent.
- One of the most interesting aspects of the system
is how much data will the central bank have
about where things go 'cause that's one of the largest,
most important differences
between digital currency and cash.
- The central bank calls this controllable anonymity
and says big data can help identify
certain behavioral characteristics.
Officials say tracking transactions
will help battle money laundering,
tax evasion, and terrorist financing,
which is harder to do with cash transactions.
And while the central bank says it won't spy
on citizen's everyday transactions,
experts are worried that China's cryptocurrency
will allow greater state surveillance.
China's central bank is not the only one pursuing
a digital state-backed currency,
but it is likely to be the first major one to launch it.
Beyond replacing cash, this could
internationalize the renminbi,
and experts think possibly create
less dependency on the US dollar.
There's still a long way before that happens.
Though most governments are still weary about crypto,
the world will be watching China's experiment closely.