How the New Chinese Cryptography Law Sets the Precedent for a Digital Currency
As of January 1, 2020, the Chinese state will implement legislation that regulates cryptographic passwords in a way that is being hypothesized to be vital to their digital currency efforts. According to China Money Network, the government of China wants to ensure its network is optimally secured, creating the need for strong security practices governed by standardization. The digital yuan, set to be the first sovereign digital currency, is expected to come to fruition this year, January 2, 2020.
Standardized Passwords on the Blockchain
It is no surprise by now that China wants to be the world leader in blockchain. While we are focused on the interoperability of blockchains by bringing one chain’s native token to another chain and vice versa, the Chinese government will look to create an encryption and password management algorithm that is uniform across the blockchains in their country. This opens the door to larger-scale interoperability between various blockchains run by corporations.
Digital currency initiatives by governments stem from the technological innovation brought to the 21st century by blockchains. However, Chinese officials have confirmed it may not be launching its new digital yuan on a blockchain. But even if it was on a blockchain, it would be a permissioned blockchain that gives the government and select institutions unilateral access to data on the network.
Effectively, it is possible that corporate China will run its customer-facing services using a blockchain as the base data layer, creating a standardized encryption technique across these blockchains will help keep things simple for users and businesses. If implemented correctly, one password or one private key can be used to access an individual’s records/accounts across the service stack.
No Rollout in Sight, But Progress is Alive
Keeping true to the opaque exterior China has built for decades, there isn’t much information regarding the launch of the digital currency. From limited public interaction with the media, however, we know that the creation of the digital currency is in its final stages, but the government is not overly eager to roll it out at the earliest.
China has high hopes for the digital yuan. Given the perception from world leaders and citizens across the world, it is unlikely that a government-run digital currency from the sub-continent will gain major traction outside of its jurisdiction. While it may be a hit in China, it is almost impossible to envision a future where China’s DC/EP overthrows the dollar dominance.