- The People’s Bank of China is trying out its own central bank digital currency, called Digital Yuan.
- China’s digital currency aims to boost transactional efficiency and cashless payments in the country.
- The designated app for the Digital Yuan is being widely adopted by the Chinese.
The concept of cryptocurrencies is gaining traction and acceptance from all around the world. Several countries are trying new ways to inculcate digital currencies into their operations and economic structure. Digital coins, like Bitcoin and Ethereum, have attracted global investors and traders. However, many countries are reluctant to accept these crypto tokens because of their volatility and decentralized nature.
Many states believe that crypto can pave the way for financial mismanagement and terror financing due to their anonymity. Alternatively, some countries are moving to develop their own version of digital currency. China has led this race for quite some time. The country initiated the project in 2014. Since then, the People’s Bank of China (PBOC) has been leading and testing the potential Digital Yuan.
An introduction to the Digital Yuan
The trials are already running after seven years of constant efforts for the national digital currency. With the official name of Digital Currency Electronic Payment (DCEP), the Digital Yuan aims to replace some percentage of cash in the country’s economic structure. With its use, banks will digitize banknotes and coins.
The digital yuan will be a legal tender in China, and thus, users will have to pay no interest to use it. With the growing demand for crypto in the country, Digital Yuan will cater to many consumers. The PBOC finds several benefits and advantages for the user once it gets integrated into the country’s economy.
The increased use of the Digital Yuan is thought to improve the financial structure making it more stable and sustainable. Experts believe that payments with digital currency will be anonymous, but the central bank will be able to catch any illegal or illicit activities.
Moreover, the public debut of the Chinese digital currency will increase the competition in the field of payments and transactions. Currently, Alipay and WeChat Pay dominate the digital payment space in China, and the Digital Yuan could be seen as a competitor. Chinese consumers are used to making daily transactions and payments with these two service providers. Thus, it would be a challenge for Digital Yuan to replace them in the longer run.
Over 140 million Chinese citizens now use the Digital Yuan app
The PBOC is running trials for the use of Digital Yuan in different major cities. These cities cover Beijing, Shanghai, and Shenzhen. The trial has crossed $5 billion in transactions with over 21 million users. Moreover, over 140 million users are on this China app.
The PBOC also launched the E-CNY wallet and gave its access to the locals of 9 cities. The e-wallet allows the use of cryptocurrency on different online apps. The PBOC collaborated with Meituan to make its digital app more accessible to consumers. Meituan is a renowned Chinese shopping platform.
The app also incorporates smart contracts, also known as sub-wallets. They support online payments between participants in a more effective and foolproof manner. Moreover, the PBOC is also collaborating with various tech giants to increase the adoption of Digital Yuan among consumers. They are working to develop gadgets, bracelets, and smartwatches that support Digital Yuan wallets.