China has arguably been a world leader in developing national digital currency, a project that it has been working on since 2014. The People’s Bank of China has spearheaded the digital yuan. Reports state that the Central Bank Digital Currency (CBDC) will replace some cash in circulation.
China had been making promising progress with testing its yuan currency. There was also an announcement about the success of encouraging progress with testing related to digital yuan currency. With the pilot’s success in a city near Shanghai in eastern China, around 181,000 consumers received ¥55 of free money given in digital wallets between May 1 and May 5 in a shopping festival.
Real-world trials were underway in China- the world’s second-largest economy. The efforts are all set to bear fruits in August with the official launch.
Know that the digital yuan is a version of regular Chinese currency deployed on a Blockchain. Also, it’s a tamper-proof online ledger technology that helps in underpinning digital coins like Ethereum and Bitcoin. Nevertheless, this is a permissioned Blockchain, which means that the People’s Bank decides who will use it.
With every emerging step, China’s prospect of becoming the first country to put the currency on a permissioned blockchain fully. And, the good news is that this national rollout has already paved a path. Also Read – 3 Most Important Cryptocurrencies Other Than Bitcoin
What is the Digital Yuan?
The Digital yuan is a way for the central bank to digitize their coins and banknotes in circulation. The Chinese market is already famous for being advanced in cashless payments. And, digital yuan is a way for speeding the process.
There is a significant decrease in cash. And, with time, money is all set to be replaced by the digital format. And, the introduction of the yuan is one of the biggest drivers behind this aspect. Back in September 2017, the Chinese government had imposed a ban on the sale or exchange of cryptocurrency. However, times are changing now, and the new coin sheds light on the reasons. The trading and selling of cryptocurrencies are possible through platforms like yuanpay, the only approved and legalized company for making transactions in China. And, with the introduction of the digital yuan, there will be financial stability through controllable anonymity.
So, is Yuan Designed to Compete with Tech Giants?
The design is kept to increase competition with WeChat, but the motive isn’t a complete replacement. Experts suggest that it isn’t a direct competitor but the newest platform that allows players to enter the market and compete with companies. Know that these can be either commercial banks or some other payment companies.
The proposed two-tier model has the purpose of averting disintermediation in the financial sector. It is because there will be no competition between the central bank and the commercial bank.
The Bottom Line – Renminbi Internationalization
China is taking progressive steps for pushing the internationalization of the yuan. What’s even better is that some commentators see digital yuan doing the same.
However, it is vital to note that digital currency currently has a domestic focus and not international use, says a high-authority Chinese official. International use isn’t an immediate priority now. But, a sure shot aspect with yuan’s introduction is that it will shake the market, and experts foresee it as a future of money.