Can anyone explain the difference between this digital currency and the current cashless system in China now? Paying with apps like wepay and alipay.
1.) On the customer side no difference. You pay the same thing. Either by DCEP ( electronic RMB) or by apps (alipay, wechat, or whatever).
2.) The major change is the settlement side. You see, all electronic payments needs to be settled between the payor and payee and usually via third party. This settlement process is the final say how much the payee should received from the payor.
As concrete examples
Payor settlement payee
you --->Alipay---> merchant
you --->Paypal--->mechant
you ---> Visa ----> merchant
etc.
As we see all of those settlement processors are middleman and usually private.
And just like all middlemen, they add to cost by either inflating the price or getting some bite of the payment.
I myself was involved in some settlement projects before, in my research, the worst of these processors
in terms of payment cut are Paypal, Visa, ..., Octopus (the one I was involved) ... Alipay and wechat pay in decreasing order.
Whereas DCEP (the digital currency) completely get rid of these middlemen.
Of course there some fees to pay like transferring from and to bank account etc.
The middleman in this case is not private but the central bank itself. So this is truly a revolution.
I dont know exactly how is this done technically because this really requires a massive
computing resources if ever truly fully implemented replacing cash. And it should work even if there
is no internet connection to central bank servers.
DCEP model
you -->central bank --> merchant
3.) This gets interesting in cross border payments.
Normally when you pay cross border overseas payment, particularly large transactions is done bank to bank.
your bank -->middleman here --->receiving bank account
And this middleman happens to be overwhelmingly SWIFT.
You can do some research about this, in short, if you pay in US dollars,
the routing instruction will eventually go through US financial system.
And yes US can block these payment instructions.
All financial sanctions we hear daily from US particularly applied to Iran and Venezuela and recently
Chinese companies are basically cutoff with this payment system.
So if those China major trading partners starts to accept DCEP,
it accomplish two things: it will increase the usage of RMB and get rid altogether with that
SWIFT settlement and circumvent all those payment restrictions.
And you just need an internet connection to pay via DCEP.