Is Digital Yuan the strategy created by the Chinese government to destroy the dominance of cryptocurrency on the world stage? Turns out to be a big yes!
Is Digital Yuan an alternative to Bitcoin?
China is the home for more than half of the bitcoin miners. Recently China shocked the entire world with its unpredicted move of banning Bitcoin mining and other related crypto services in China.
Parallelly, it is well known that Chian has been working on its electronic payment system since 2014 and that is named as digital Yuan. Though it was not the talk way back in those days, it has certainly become the hottest topic on China’s breakdown of bitcoin. The ultimate aim of Digital Yuan initialized and carried out by the People’s Bank of China (PBOC) is to replace the cash in circulation initially at prime cities and later entire China.
These Digital Currency Electronic Payment (DCEP) trials are already underway in China. An insight says that China has asked the famous food retailer McDonald’s in Shanghai to implement the Digital Yuan as a mode of payment before the Winter Olympics.
What is Digital Yuan?
Well, if there’s a way for the central bank to digitalize the currency in circulation, that is Digital Yuan. Being a pioneer in the cashless payment systems, introducing the digital Yuan would speed up the growth of China’s financial system. According to Yan Xiao, project lead for digital trade at the World Economic Forum, the use of cash is already decreased and will soon be replaced by something in digital format. There is a huge chance that ‘something’ could be Digital Yuan.
Why did China introduce Digital Yuan?
The deputy governor of PBOC, Fan Yifei said that producing and storing physical currencies is getting expensive and it will be wiser to switch to digital currencies. Also, the major reason is that cash and coins are easy to counterfeit and they can be misused (some illicit activities) due to their anonymous nature. Thus introducing Digital Yuan could offer financial stability to the Chinese economy through a system of “controllable anonymity”. In layman’s terms, the Digital Yuan is anonymous to some extent but the illegal activities can be tracked by the central bank using data analysis. This could also enhance businesses in and around China by making payments more efficient and improving the transmission of monetary policy.
Also, now China’s digital payment space is governed by private firms like AliPay and WeChat Pay. To put an end to this and to bring an equally strong competitor, the PBOC strives to put a lot of effort into launching Digital Yuan.
The chance of AliPay or WeChat Pay going bankrupt is unlikely, but still, the Chinese government wants to keep the digital payments arena at a level with the private competitors. It also tries to create a more efficient Digital payment system to take the fruits of digitalization to everyone
Author’s Note: When something is being implemented by the government, there is a high probability that most of the population will engage in it. This gives no fear when trying something new compared to one owned by private firms. China is rocking the finance forum with its innovation and the total world is eager to see the launch of Digital Yuan (expected to be during the Winter Olympics).