Context: China launched the latest round of pilot trials of its new digital currency.
• Officially titled the Digital Currency Electronic Payment (DCEP), the digital RMB (or Renminbi,
China’s currency) is, as its name suggests, a digital version of China’s currency.
• It can be downloaded and exchanged via an application authorized by the People’s Bank of
China (PBOC), China’s central bank.
• China is among a small group of countries that have begun pilot trials; others include Sweden,
South Korea and Thailand.
Analysis:
• Unlike an e-wallet such as Paytm in India, or Alipay/ Wechat in China which are based on third-party software applications, the Digital RMB does not involve a third party.
• Third party means, in order to make transactions between Buyer and Seller, they have to
depend upon another person or entity (payments application provider in this case)
• Digital RMB is legal tender guaranteed by the central bank, not a payment guaranteed by a
third-party operator.
• There is no third-party transaction, and hence, no transaction fee.
• This digital currency does not require Internet connectivity.
• The payment is made through Near-field Communication (NFC) technology.
• A “key objective of China’s sovereign digital currency” was “to maintain financial stability
should ‘something happen’ to Alipay and WeChat Pay.
• The central bank-issued digital RMB will turn the logic of decentralized cryptocurrencies on its
head, without the privacy and anonymity they offer, by giving regulators complete control over
transactions.
• There are global motivations as well, DCEP could help facilitate the internationalization of
the RenminbiNear Field Communication (NFC) Technology
• Near Field Communication (NFC) is a contactless communication technology based on a radio
frequency (RF) field (using a base frequency of 13.56 MHz) that enables two electronic devices
to transfer data.
• The most distinctive characteristic of NFC is the fact that it can transmit small amounts of data
wireless-only within a close range (about 4 or 5 centimeters) while other methods, such as
Bluetooth and Wi-Fi, have a wide transmit range of up to 10 or even 100m.
o The reason why NFC technology is used to identify objects is that, with such a close
transmitting range, it is more secure and less vulnerable to data hijacking.
• NFC, near field communications, is a non-contact technology and as such does not require
physical electrical contact to be made.
o This means that cards using NFC do not need to be inserted into a reader with all the
problems of poor contact that are present when cards can be mistreated and used
anywhere.
o As no physical connectors are used with NFC near field communication, the connection is
more reliable and does not suffer problems of contact wear, corrosion, and dirt experienced
by systems using physical connectors.
• Application areas are tracking and managing inventories, assets, people, animals, contactless
payment systems, security cards, and social networking.
• NFC has originated from the evolution of studies and researches in the RFID field, or Radio
Frequency Identification.
o The two technologies, NFC and RFID, have much in common, but one of the main differences
between them is demonstrated by the antenna design.
o Moreover, that the arrangement for the data exchange is no longer a card reader or atypical
RFID but a smartphone is another outstanding element.
Do you know?
• E-wallet or electronic wallet is a type of electronic card which is used for transactions made
online through a computer or a smartphone.
• The utility of an e-wallet is the same as a credit or debit card.
• An e-wallet needs to be linked with the individual's bank account to make payments.
• The main objective of e-Wallet is to make paperless money transactions easier.
• E-wallet has mainly two components, software, and information.
o Software component stores personal information and provides security and encryption of
the data.
o Information component is a database of details provided by the user which includes their
name, shipping address, payment method, amount to be paid, credit or debit card details,
etc.