China's Digital Yuan Blurs the Lines Between CBDCs and Crypto

China's digital yuan, or DC/EP, is not just important from the perspective of geopolitics and its implications for the current underpinnings of the global financial system.

As a result, the design choices of the DC/EP system are of high interest for the many central banks working on CBDCs.

What is evident in the DC/EP's design is that China has pioneered technological processes that will revolutionize monetary and financial functions.

Our overall findings will be launched soon in a detailed report series, and one highly significant conclusion is in the surprising similarities between the architecture of the DC/EP and cryptocurrencies.

This is even more significant since China is seen as being closed to cryptocurrencies and it is known the DC/EP system is not entirely blockchain-based.

In the design of the DC/EP system, there is a unique feature of hardware chip-card wallets.

While fiat to crypto conversion is restricted and regulated to various degrees globally, the legal tender status of the DC/EP enables another powerful suite of features for hardware wallets - seamless cash conversion.

Citizens can convert cash to offline chip-card DC/EP deposits or get cash from chip-card DC/EP deposits using a range of ATM-like terminals.

Linking the DC/EP closely to such existing models of digital payments will greatly enable adoption.

There are also multiple levels of users within the digital currency system of the DC/EP. For each level of user, there are certain programmable functions enabled for DC/EP usage.